The dollar slipped toward a six-month trough against the euro prior to the release of a crucial monthly US payrolls report later in the day that will offer clues to the health of the economy and the outlook for monetary easing.

Traders now predict four quarter-point interest rate cuts from the Federal Reserve in the remainder of this year, and reduced the odds of further Bank of Japan (BOJ) tightening to almost nil.

The risk-sensitive Australian and New Zealand dollars plunged.

Shockwaves from Trump’s harsher-than-expected tariffs were still rippling through markets more than 24 hours after being unveiled.

Stocks took the brunt of a searing selloff, driving investors to the safety of assets such as bonds and gold on fears that a full-blown trade war could trigger a global slowdown and stoke inflation.

The dollar had already been on the backfoot this year after initial euphoria over Trump’s policy agenda turned into worry that his focus on trade barriers could lead to stagflation, or even a US recession.

The dollar index, a measure of the currency against a basket of six major peers, plunged 1.9% yesterday, its worst day since November 2022, and was down a further 0.3% in the latest session.

The dollar weakened 0.31% to ¥145.65 by 4.40pm.

It slumped 2.2% in the prior session, at one point dipping as low as ¥145.19 for the first time since Oct 2.

It tumbled 0.71% to CHF0.8532, another traditional safe haven, at a fresh six-month trough.

The euro rose 0.33% to US$1.1088, after jumping as high as US$1.1147 yesterday, a level not seen since Sept 30.

Sterling was steady at US$1.3101, following its push as high as US$1.3207 a day earlier, the first time it had hit that level since Oct 3.

“‘Uncertainty’ is the word of 2025, and while we now have the tariff rates and the timeline, and Trump and (treasury secretary Scott) Bessent have shown some willingness to negotiate, the questions being asked of the market have only increased,” Chris Weston, head of research at Pepperstone, wrote in a note to clients.

“The loss of confidence to hold US dollars is clear,” Weston said.

Echoing that sentiment, Deutsche Bank warned yesterday of the risk of a crisis of confidence in the US dollar, saying major shifts in capital flow allocations could take over from currency fundamentals and spark disorderly currency moves.

Trump said he would impose a 10% baseline tariff on all imports to the US and higher duties on some of its biggest trading partners, including a rate of 20% on the EU and a rate of 24% on Japan.

China now faces combined duties of some 64%, when also factoring in a tariff of 10% that Trump levied in his first presidential term.

Both China and the EU vowed countermeasures, raising the risk of a broader trade war.

Chinese markets are observing a national holiday today, but the dollar slid 0.5% to ¥7.2450 in offshore trade, its lowest since March 20.

Yesterday, it had leapt as much as 0.7% to a two-month high at 7.3485.

The Australian dollar, which often acts as a liquid proxy for the yuan, as well as being a barometer of risk sentiment, tumbled 1.38% to US$0.6421.

Similarly, the New Zealand dollar plunged 1.28% to US$0.5720.

“I think Aussie is really starting to come around now to the scope of the tariffs on Australia’s largest trading partner,” said Tony Sycamore, an analyst at IG.

“The situation is absolutely horrendous for China,” Sycamore said.

Economists estimate the US economy added 135,000 jobs in March, down from 151,000 the month before, ahead of the release of today’s report.

A few hours afterwards, Federal Reserve chair Jerome Powell is set to deliver a speech on the economic outlook.

Traders have ramped up bets for Fed easing this year in the aftermath of Trump’s latest tariffs, penciling in quarter-point cuts for June, July, October and December.

The two-year US Treasury yield, which is sensitive to policy expectations, sank some 6 basis points (bps) to 3.6611% today, extending an 18 bps slide from the previous day.

By contrast, traders only predict about 8 bps of rate hikes by the BOJ by year-end, whereas one quarter-point rise was previously seen early in the second half of the year.

In cryptocurrencies, Bitcoin rose 0.5% to just shy of US$83,000, continuing to trade in a relatively tight range over the past few weeks, despite the chaos in most other markets.