TOKYO- The dollar struggled on Wednesday to lift off a five-month low against major peers, as worries about the US economy simmered, in view of President Donald Trump’s unpredictable trade policies.
The euro hovered around a five-month peak on increased optimism for an end to the war in Ukraine.
The Canadian dollar was steady after a volatile session on Tuesday, when Trump pledged to double tariffs on steel and aluminum to 50 percent, only to reverse course just hours later.
The Bank of Canada decides policy later on Wednesday, with traders expecting another quarter-point interest rate cut.
“Trade uncertainty persists and therefore so does market volatility,” said Kyle Rodda, senior financial markets analyst at Capital.com.
“The US growth outlook continues to deteriorate,” Rodda added, pointing to increased attention on the release of the consumer price index (CPI) later in the day, which he warned “could be a significant source of volatility”.
The US dollar index which measures the currency against a basket of six major peers, edged up 0.08 percent to 103.53 in Asian trading hours, following Tuesday’s slide of 0.46 percent that took it as low as 103.21 for the first time since October 16.
A run of softer US economic data continued on Tuesday with small-business confidence dropping for a third straight month in February.
Investors have been on edge since Trump avoided ruling out the possibility that a recession would result from his trade policies in an interview on Sunday with Fox News.
Wednesday’s CPI report may be setting the market up for “a lose-lose situation”, said Julien Lafargue, chief market strategist at Barclays Private Bank.
“A higher-than-expected reading could fuel the stagflation narrative while a weaker-than-expected print could cement recession fears,” Lafargue said.
