By Chibuike Oguh and Stefano Rebaudo
NEW YORK (Reuters) -The U.S. dollar rebounded against safe-haven currencies including the yen and Swiss franc on Wednesday after President Donald Trump announced a 90-day pause on many new tariffs on trading partners, but escalated a confrontation with Beijing by hiking duties on Chinese goods.
Trump said he had authorized a 90-day pause in “reciprocal” 10% tariffs but was also raising the tariff rate for China to 125%, effective immediately.
The dollar had been weakening against its peers earlier in the session after Trump’s “reciprocal” tariffs on dozens of countries took effect on Wednesday, including massive 104% duties on Chinese goods.
China had swiftly retaliated with an 84% tariff on U.S. goods from Thursday, while EU countries also approved on Wednesday the bloc’s first countermeasures against U.S. tariffs.
“Huge moves in the marketplace right now, particularly on equities who are taking this news very well,” said Amarjit Sahota, executive director at Klarity FX in San Francisco.
“But the questions are really going to come: why did we see this reprieve today and is it even a good idea? Personally, I don’t think it’s a good idea: 90-day pause just creates more uncertainty for 90 days.”
On Wall Street, all three main indexes surged following the Trump announcement, with the Nasdaq jumping 10%, benchmark S&P 500 gaining 8.6%, and the Dow rising 7%.
Benchmark 10-year Treasury yields pared gains after the Treasury saw strong demand for a $39 billion sale of the notes on Wednesday. The yield on benchmark U.S. 10-year notes rose 13.6 basis points to 4.392%.
The greenback rose 1.2% against the safe-haven yen to 148.80, reversing losses in early session trade. It gained 1.14% versus the Swiss franc to 0.8569 franc.
“It looks like very poor policy decisions or at least the plan or execution has been miserable. Markets are liking the reprieve for now so they are rallying but is it really sustainable? And then what does it mean for the U.S. dollar,” Sahota added.
U.S. Treasury Secretary Scott Bessent reiterated in a Fox News interview that the U.S. still has a strong dollar policy.
German conservatives under Friedrich Merz agreed a coalition deal with the centre-left Social Democrats on Wednesday, helping to support the euro.
The single currency firmed 0.11% to $1.09685, creeping back towards last week’s peak at $1.1147.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rebounded from early session losses. It was up 0.11% to 102.88.
The People’s Bank of China will not allow sharp yuan declines and has asked major state-owned banks to reduce U.S. dollar purchases, people with direct knowledge of the matter told Reuters on Wednesday.
The dollar was down 1.01% versus the yuan offshore to 7.349 yuan , after reaching an all-time high at 7.4292.
(Reporting by Stefano Rebaudo and Chibuike Oguh in New York; Editing by Kim Coghill, Mark Potter, Emelia Sithole-Matarise, Gareth Jones and Nia Williams)
