Dollar's Descend: Uncertainty Looms Over U.S. Tariff Decisions

The U.S. dollar remained unstable on Friday, heading for its fifth consecutive monthly decline. Traders grappled with ongoing uncertainties surrounding U.S. trade policies and fiscal health, as they anticipated crucial inflation reports due later in the day.

The dollar's choppy week ended lower after a federal court temporarily reinstated President Donald Trump's broad tariffs, counteracting a previous court's order to block them. Trump expressed hope that the Supreme Court would reverse the decision, with officials reserving other presidential powers to enforce the tariffs. This tariff uncertainty continues to stir markets, prompting investors to divert from U.S. assets out of concern over Trump's volatile policies impacting U.S. market strength.

As inflation is pivotal, the Federal Reserve's preferred measure—the personal consumption expenditure (PCE) report—faces investor focus. Concerns about fiscal debts in developed economies and weak appetites for long-term U.S. and Japanese credit reinforce dollar volatility. Meanwhile, an emerging market currency index experienced a notable 2.2% gain in May, its largest since November 2023.

(With inputs from agencies.)