By Kevin Buckland
TOKYO (Reuters) – The U.S. dollar remained close to a three-month low against major currencies on Wednesday as tensions escalated with the latest round of U.S. tariffs and retaliatory measures from Canada and China, sparking concerns of a growing trade war. Hong Kong stocks saw gains, but the Chinese yuan retreated slightly following the start of the annual parliamentary sessions of the National People’s Congress in Beijing, where a 5% economic growth target for 2025 was maintained.
The euro surged to nearly a four-month high after German political parties reached an agreement on a 500-billion-euro infrastructure fund, while the British pound also held steady near a three-month peak. Crude oil prices dropped to six-month lows, and bitcoin stabilized around $87,500 after a volatile week.
Kyle Rodda, senior financial markets analyst at Capital.com, commented, “Fears of weakening U.S. and global economic activity are evident in the markets, with cyclical stocks leading the downturn. The uncertainty is keeping investors cautious, mirroring concerns felt by American businesses and consumers.”
Australian stocks slumped by 1.1%, while Japan’s Nikkei remained relatively unchanged after fluctuating between small gains and losses. The Hang Seng index in Hong Kong rose by 1.1%, but Chinese markets showed mixed performance, with blue-chip stocks barely moving. China’s offshore yuan depreciated by about 0.3% to 7.2716 per dollar after a 0.7% gain on Tuesday.
In response to the ongoing trade tensions, Beijing announced an increased budget deficit target of around 4% of GDP in 2025, up from 3% in 2024, allocating more fiscal resources compared to the previous year.
Saxo’s chief investment strategist, Charu Chanana, remarked, “Growth, inflation, and fiscal spending targets were largely in line with expectations, indicating a cautious approach from China in light of tariff threats, potentially reserving resources for future external challenges later in the year.”
The previous day, the U.S. S&P 500 declined by 1.2%, but futures rebounded by 0.5% on Wednesday. MSCI’s global equity index remained flat, showing a 1.9% decrease so far in the week.
President Trump’s implementation of 25% tariffs on Mexican and Canadian imports, along with doubled duties of 20% on Chinese goods, took effect on Tuesday, leading to retaliatory measures from China and Canada. The U.S. dollar index, which compares the currency against major counterparts, held steady at 105.60 after a two-day 1.9% decline that brought it to its lowest level since December 6.
The euro reached $1.0637, its highest point since November 13, while the British pound remained at $1.2786, not
The price of the currency pair increased to 0.77 in the most recent trading session, marking the first time it has reached this level since November 18. This information was reported by Kevin Buckland and the editing was done by Muralikumar Anantharaman and Jacqueline Wong.
