Dollar Slumps to Weakest Level Since Russia Invaded Ukraine in Early 2022 – Currency Thoughts
Dollar Slumps to Weakest Level Since Russia Invaded Ukraine in Early 2022
April 11, 2025
The weighted DXY dollar index sank 1.3% overnight, including declines of 1.5% against the Swiss franc, 1.7% versus the euro, 1.3% relative to the yen and 1.4% vis-a-vis New Zealand’s dollar. The greenback’s drop is part of a broader flight from perceived U.S. “safe” U.S. assets like Treasury bonds. The 10-year Treasury yield, even in the wake lower-than-anticipated producer price inflation last month, currently weighs in at 4.43%, up from as low as 3.89% earlier this frenetic week but below the week’s high of 4.495%. Reports have emerged that the most compelling reason behind President Trump’s pause on reciprocal tariffs was the increasingly dysfunctional Treasury market, but that change of heart may have come too late to salvage those intangible U.S. features that made the dollar and U.S. financial markets the linchpin of the international monetary system since 1945.
After yesterday’s steep setback in U.S. equities, futures are just marginally future but with downward momentum as the opening bell approaches. In the Pacific Rim, share prices closed down by 3.0% in Japan, 1.8% in Singapore, 1.5% in New Zealand, 0.8% in Australia, and 0.5% in South Korea, but markets rose 2.8% in Taiwan, 1.1% in Hong Kong and 0.5% in China. The government of Xi responded to the 145% cumulative U.S. tariff on Chinese goods with a 125% tariff against U.S. exports to China, and it has taken other steps to limit economic damage from U.S. policy changes, including conferring with other Asian leaders to coordinate their responses.
Meanwhile, the European Union has paused the tariff hikes against the U.S. that were announced earlier this week. European equities are down so far by 1.1% in Germany, 1.0% in Italy and 0.5% in France where President Macron declared the U.S. tariff pause a fragile one.
While U.S. long-term interest rates remain elevated, other key 10-year sovereign debt yields fell overnight by six basis points in Germany, five bps in Japan, 4 bps in Spain, and 3 basis points in France and Italy.
Investors are scrambling for non-American safe havens. Prices for gold touched a new record high of $3,255.9 per ounce overnight, and bitcoin‘s price rose 3.1%. WTI oil fell below the $60 per barrel to touch $59.5, a price that would disincentivize the heavy business investment that President Trump seeks in the fossil fuel industry.
U.S. producer prices fell 0.4% on month in March, whereas analysts were predicting a small rise. The 12-month increase slowed to a 6-month low of 2.7%. The 3.3% year-0n-year rise PPI excluding food and energy represents a 6-month low and a considerable drop from the March 2022 peak of 9.7%. Likewise, producer price inflation excluding food, energy and trade decelerated further to a 25-month low of 3.4% compared to a March 2022 peak of 7.1%. These figures, while welcome, do not yet reflect the inevitable pass-through of recently announced tariff hikes and will not elicit an immediate reaction from Federal Reserve policy.
Price figures on today’s data menu for other countries,
- Preliminary German CPI figures for March (up 0.3% from February and down to a 4-month year-on-year low of 2.2%) were reconfirmed as unrevised from the earlier estimates. The services component decelerated to an 11-month low of 3.5%, but food rose to a 14-month high.
- Spanish consumer price inflation in March was likewise left unrevised at 2.3% overall and a 41-month low of 2.0% excluding food and energy.
- Swedish consumer prices in March were 0.5% below the year-earlier level and down to a 2.3% core rate from 2.9% in February.
- Serbian CPI inflation of 4.4% last month was at a 3-month low, having fallen earlier from 16.2% in March 2023 to 3.8% last June.
- Brazilian consumer prices climbed 0.6% in March, lifting their 12-month rate of increase to a 25-month high of 5.5%.
British monthly GDP growth in February (+0.5% on month, +1.4% on year, and a 0.6% average gain in Nov-Feb) easily surpassed analyst expectations. Industrial production shot up 1.5% on month and posted the first on-year increase (0.1%) since the end of 2023, while construction went up 0.4% on month and by the most in year-on-year terms (1.6%) in nine months. British trade data for February were also reported today, revealing a combined GBP 2.87 billion deficit in the year’s first two months versus a gap of 0.3 billion pounds a year earlier. The merchandise trade shortfall totaledGBP 20.8 billion, up from GBP 18.2 in January and GBP 15.7 billion a year earlier.
Other reported data release highlights this Friday include:
- The preliminary April U.S. consumer sentiment index compiled jointly by the U. of Michigan and Reuters. When he was president-elect Trump in December amid high enthusiasm about the economy-friendly steps he intended to enact, the index rose to 74.8. It subsequently fell to 71.7 in January, 64.7 in February, 57.0 in March and now 50.8.
- Swiss consumer confidence has been low but stable, rise three points in March to a 2-month high of -35 versus -30 in December.
- Chinese car sales in March were 8.2% higher than a year earlier.
- Industrial production in India in February was down 6.4% year-on-year, the weakest such change in ten months.
- Mexican industrial production leaped 2.5% in February, the most since the first year of Covid, but the year-on-year comparison still showed a drop, albeit smaller at -1.3%.
- Germany’s EUR 20.0 billion current account surplus in February was larger than that of EUR 15.0 billion in the prior month but smaller than EUR 26.7 billion in February 2024.
- New Zealand’s manufacturing purchasing managers index slid 0.7 points to a 2-month low of 53.2 last month.
The Central Reserve Bank of Peru’s policy interest rate was kept at 4.75% at this month’s review. Such had been three percentage points higher for eight months during 2023 but then lowered by 100 basis points late than year, another 175 bps during 2024 and 25-basis points more this past January. Peruvian CPI inflation of 1.3% last month was below the target corridor midpoint of 2% and at a 78-month low. A released statement warns that “the outlook for global economic activity has deteriorated due to the high uncertainty stemming from restrictive measures on international trade. Financial market volatility has increased, along with risks to the global economy.”
The National Bank of Kazakhstan‘s policy rate was lifted at the March policy review by 125 basis points and, at 16.5%, is now has high as its been since October 2023. Officials chose not to raise such further at April’s review today, however. The 16.5% level is up from 14.25% maintained from July to November of 2024. Kazakhstani inflation has accelerated to a 10-month high of 10.0% from 8.3% last July. Updated inflation forecasts now foresee CPI inflation put inflation at 10-12% this year, 9-11% in 2026, and 5.5-7.5% by end-2027. “Further decisions on the base rate will depend on whether the actual dynamics of inflation correspond to its forecast trajectory and the overall balance of risks to price stability.”
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British GDP and trade, Central Reserve Bank of Peru, National Bank of Kazakhistan, U.S. producer prices, unsettled Treasury market
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