New York Forex Market: Trade Policy Uncertainty Drags Down the Dollar, Australian Dollar Nears Three-Year High

Due to trade uncertainties, the Bloomberg Dollar Index fell on Wednesday. The Australian dollar was the best performer among G-10 currencies against the US dollar after the country's inflation data exceeded expectations.

The Bloomberg Dollar Spot Index fell 0.2%; previously, it had risen slightly for two consecutive days.

US President Donald Trump strongly defended his policies and economic performance in the State of the Union address, reiterating that after setbacks in the Supreme Court, he would impose trade tariffs through other means.

"The US dollar is losing upward momentum due to the ongoing structural headwinds brought by Trump," said Andrew Hazlett, a foreign exchange trader at Monex Inc. "New tariffs and their impact on trade policy are severely weighing on the dollar's performance."

AUD/USD rose 0.9% to 0.7123 (UTC+8); Australia's January inflation was higher than expected, mainly driven by rising housing costs, indicating that monetary policy may need further tightening.

This exchange rate is approaching the three-year high touched earlier this month.

AUD/JPY rose 1.3% to 111.399 (UTC+8), the highest level since 1990.

After the KISHIDA administration nominated two policy board members of the Bank of Japan considered dovish, the yen was the worst performer among G-10 currencies.

USD/JPY rose 0.4% to 156.41 (UTC+8).

The currency market expects about 43 basis points of monetary policy tightening by the end of the year, down from 58 basis points on Tuesday.

USD/JPY remains above its 55-day moving average; the February 9 high of 157.76 (UTC+8) forms short-term resistance, and a break above that level would open up further upside with a target of the January 23 high at 159.23 (UTC+8).

EUR/USD rose 0.3% to 1.1806 (UTC+8);

GBP/USD rose 0.5% to 1.3550 (UTC+8).

Editor: Ding Wenwu