Dollar Dips as Trump's Tariff Plans Spark Relief Rally

The dollar dropped 1% after reports suggested President-elect Trump might apply tariffs only to critical imports, alleviating fears of broad levies. This potential move led to a rise in the euro and other currencies as markets reacted positively to less severe tariff implementations, impacting recent dollar strength.

The dollar experienced a 1% slump on Monday following reports that President-elect Donald Trump is considering applying tariffs only to critical imports. This potential shift in policy could provide relief to nations anticipating more extensive levies.

The U.S. dollar index, already under pressure, fell to a new low of 107.86, compared to the 109.54 high last Thursday. Concerns over Trump's tariff plans have previously bolstered the dollar, affecting foreign currencies like the euro and China's yuan.

The euro surged by 1.13% to $1.0433, marking a weekly high after hitting a 25-month low. Investor relief is evident as Lee Hardman from MUFG comments that fears of initial broad tariffs might have been exaggerated, leading to a reversal in the dollar's recent trends.

(With inputs from agencies.)