US dollar weakens on tariffs announcement

The US dollar weakened on Friday on the news that the US will charge duties for coated paper imports from China. The greenback dropped 0.4 percent in relation to the euro, to $1.3395, while it fell 0.5 percent to $1.9710 versus sterling and was 0.6 percent lower against the yen to ¥117.30.

The tariffs decision was a reversal of a policy that exempted subsidized goods from non-market economies from tariffs. Some analysts felt that the reaction of the currency markets to the announcement was exaggerated, but traders worried that the move to impose the new tariffs could add to pressures toward inflation. The dollar was also hurt by news earlier in the week that new home sales were at their lowest point in several years and that consumer confidence was weaker than had been anticipated.

The euro was stronger over the week on lower unemployment and stronger business confidence in Germany, which some analysts said meant that worries about the hike in value added taxes that took effect at the beginning of the year were misplaced. Some analysts expect now that Eurozone interest rates will be at 4.5 percent by the end of the year.

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