US Dollar Struggles Amid Trade War and Fiscal Concerns

The U.S. dollar took a hit at the start of this week, retreating from last week's brief surge. Financial markets are reacting to President Trump's plans to increase tariffs on imported steel and aluminum, a move that could hinder economic growth while fueling inflation concerns.

The greenback has been volatile, declining 3% after early April tariffs, with ongoing trade tensions sparking fears of a U.S. recession. Recent relief came when a U.S. trade court blocked significant tariffs, but a subsequent appeal kept investors on edge. Meanwhile, the dollar's weekly rally is overshadowed by fiscal challenges as the Senate debates a tax and spending bill projected to increase national debt substantially.

Analysts point to section 899 of the bill as pivotal, potentially allowing new taxes on international investors in periods of heightened foreign tax disputes. Such measures could deter investment inflows, further pressuring the dollar. As fiscal policy remains uncertain, investor sentiment towards the currency and U.S. assets continues to wobble.

(With inputs from agencies.)