Donald Trump’s second presidency has triggered notable shifts in global currency markets, though not exactly as investors predicted. While tariffs are traditionally seen as supportive for the U.S. dollar, the greenback has weakened against most major developed market currencies this year — except the Canadian dollar — as concerns grow that trade uncertainty may hinder the U.S. economy.
Key Factors Influencing the Dollar’s Movement
Tariff Concerns: While tariffs can strengthen the dollar, their impact is diminished when applied to major trading partners like Canada and Mexico, reducing confidence in the U.S. economy.
Recession Risks: Growing economic uncertainty has fueled demand for alternative currencies like the euro, yen, and Swedish crown.
Major Currency Movers Amid Market Shifts
1. Euro Surges on Policy Changes
The euro has risen to approximately $1.09, its highest level since the U.S. election on November 5. Germany’s plans to increase defense and infrastructure spending have further boosted investor confidence in the euro.
Current Outlook: Analysts at BofA expect the euro to climb to $1.15 by the end of 2025.
Driving Factors: The European Central Bank nearing the end of its easing cycle, along with positive economic reforms, has strengthened the euro’s position.
2. Japanese Yen Gains Strength
The yen has climbed 6% against the dollar this year, driven by higher Japanese interest rates and safe-haven demand.
Key Drivers: Rising wages in Japan and expectations that the Bank of Japan will accelerate rate hikes have improved the yen’s appeal.
Investor Sentiment: Speculators are increasingly betting on further yen appreciation.
3. Canadian Dollar and Mexican Peso Stabilize
Canadian Dollar: Trading at relatively stable levels, the loonie still carries a 2% risk premium due to ongoing tariff tensions.
Mexican Peso: After hitting three-year lows, the peso has rebounded by 5%, nearing its pre-election levels.
While Trump’s suspension of tariffs on Canadian and Mexican goods was a positive step, continued volatility in these currencies remains likely.
4. Chinese Yuan Defies Expectations
Despite extensive U.S. tariffs on Chinese exports, the yuan has strengthened to 7.25 yuan per dollar. Beijing’s decision to avoid aggressive currency devaluation has supported the yuan’s stability.
Key Insight: The yuan’s strength has been bolstered by stronger performance in other Asian currencies, which has indirectly aided Chinese exporters.
5. Swedish Crown’s Impressive Performance
The Swedish crown has surged by 9% against the dollar, reaching its strongest level since late 2023.
Driving Forces: A combination of robust European stock performance, improved economic outlook, and Sweden’s increased defense spending has fueled the crown’s rise.
Leveraging Financial Data for Currency Insights
To track real-time currency movements, traders and investors can utilize the following Financial Modeling Prep APIs:
? Forex API — For live forex data, historical exchange rates, and currency pair insights.? Economic Calendar API — For tracking key economic events influencing forex markets.
Conclusion
Global currencies are navigating uncertain terrain amid tariff risks, geopolitical shifts, and economic concerns. While the dollar remains vulnerable, key currencies like the euro, yen, and Swedish crown are showing strength due to favorable domestic policies and shifting investor sentiment.
Staying informed through reliable data sources like the FMP Forex API is crucial for traders aiming to capitalize on these evolving market trends.
