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Dollar finds footing amid Japan trade deal
Dollar index steadies around 97.5 after a three-day decline, supported by fresh trade agreements.
Japan–US deal announced: 15% tariffs, $550 B Japanese investment, LNG, Boeing, rice, defense deals.
China truce likely extended; meetings set for next week.
Indonesia and Philippines agree to tariff frameworks—signs of broader trade thaw.
Canada cautious—Prime Minister Carney downplays expectations for imminent deal.
US Dollar pauses slide
The dollar index, tracking the USD against six major currencies, stabilized near 97.5 on Wednesday. The pause follows a three-session decline triggered by uncertainty surrounding the looming August 1 deadline for finalizing trade agreements with Washington. However, the unveiling of a bilateral trade deal with Japan, along with signals of a potential extension of the China tariff truce, provided relief and halted further dollar weakness.
Japan–US trade deal boosts risk appetite
President Trump confirmed a landmark agreement with Japan, setting a 15% tariff on Japanese exports (down from a threatened 25%). This deal includes $550 billion in Japanese investment into the U.S. economy, with commitments spanning Boeing aircraft (100 units), LNG infrastructure, rice purchases, and expanded defense contracts.
The outcome sparked a surge in risk sentiment, driving the Nikkei above 41,000—a level not seen in over a year—as auto and industrial stocks rallied. Conversely, the yen slumped, reversing earlier safe-haven gains, as traders favored risk-on positioning.
China truce extension in sight
Treasury Secretary Scott Bessent indicated strong prospects for extending the tariff pause with China, set to expire on August 12. He confirmed upcoming talks in Stockholm next week, hinting at a formal extension announcement as early as Monday or Tuesday. Though structural issues remain—such as state subsidies and technology policy—markets welcomed signs of continued engagement and de-escalation.
Southeast Asia joins the momentum
Indonesia reached a framework agreement: Jakarta will lift most U.S. tariffs in return for a 19% U.S. tariff on its goods—a relief compared to the previously threatened 32%. Both sides aim to finalize the deal in the coming weeks.
Philippines also secured better terms, with its U.S. tariff reduced from 20% to 19% following a meeting between Trump and President Ferdinand Marcos Jr.
Canada remains an outlier: Prime Minister Mark Carney cautioned that Ottawa will not accept an unfavorable trade deal, tempering expectations of a breakthrough within the next ten days.
Fed Chair Powell in political spotlight
President Trump commented that Fed Chair Jerome Powell will be "only going to be there a short while," highlighting ongoing political scrutiny of the central bank. While no firm timeline was given, the remark keeps Powell’s term and independence in focus amid intensifying economic and trade pressures.
