Dollar Tumbles: A Week of Unexpected Turns

The dollar fell sharply this week, marking its worst performance in over a year amidst hopes that U.S. tariffs may be less severe than anticipated. This shift followed positive indications from U.S.-China trade talks, with President Trump expressing optimism about a potential deal.

The dollar took a significant hit on Friday, recording its worst weekly performance in over a year. Investors' expectations were tempered by signals that U.S. tariffs might be less severe than initially feared, reducing the threat of a trade war. President Donald Trump expressed optimism following a cordial conversation with Chinese President Xi Jinping, suggesting a trade agreement might be achievable.

Currency markets reacted swiftly, with the dollar index down by 0.67%, closing at 107.42. Trump's remarks lifted the Chinese yuan, and the onshore unit saw its strongest performance in eight weeks. The euro also gained strength, owing to positive business growth data in the euro zone, while the yen showed minor gains after the Bank of Japan's interest rate hike.

Trump's push for the Federal Reserve to cut interest rates added to the market dynamics. As the U.S. central bank heads into its meeting next week, all eyes will be on any signals hinting at a potential rate slash in March. On cryptocurrencies, Trump ordered the establishment of a working group to overhaul U.S. crypto policy, further stirring financial market activity.

(With inputs from agencies.)