Dollar catches breath, Brazil real slides on tariff threat; bitcoin near record high

The U.S. dollar stabilised on Thursday after retreating from a two-week high versus major peers, as markets took President Donald Trump’s latest tariff salvos in stride, except in Brazil where a threatened 50% levy sent the real sliding, Reuters reported.

The dollar had been knocked back by a sharp decline in U.S. Treasury yields as a 10-year note auction on Wednesday garnered strong demand, tempering worries about the “Sell America” narrative that had seen Treasuries, the dollar and Wall Street stocks sold off in tandem earlier this year.

Overall, investors were hungry for riskier assets with the most damaging tariff scenarios looking increasingly unlikely, helping Nvidia become the first stock ever with a $4 trillion valuation, and lifting cryptocurrency bitcoin to an all-time peak just shy of $112,000.

Sentiment also drew support from minutes of the Federal Reserve’s last meeting, with most policymakers of the opinion that interest rate cuts will be appropriate later this year.

The dollar index, which measures the currency against six major peers, was little changed at 97.404, finding a floor following a 0.2% decline on Wednesday, the same day that it pushed to the highest since June 25 at 97.837 before losing momentum.

With the exception of Brazil, Trump’s latest batch of letters to trade partners contained tariff rates close to those already proposed in his original “Liberation Day” announcement on April 2, as had been the case with other letters this week.

Trump has also left the door open to extensions beyond the new August 1 deadline if countries make compelling proposals.

Brazil had originally been slated for just the baseline 10% levy, but Trump cited not just trade practices but the treatment of its former president, Jair Bolsonaro.

Bolsonaro, who was friendly with Trump when they were both in office, is on trial on charges of plotting a coup to stop current President Luiz Inacio Lula da Silva from taking office in January 2023.

The real dropped as much as 2.8% to 5.6047 per dollar for the first time since June 6 overnight, and was last changing hands at 5.5826 per dollar.

“It is a reminder of Trump’s penchant for tariffs as a tool against a wide range of grievances, trade fairness or otherwise,” Taylor Nugent, senior markets economist at National Australia Bank, wrote in a client note.

While the latest batch of letters failed to move markets much outside of Brazil, Nugent said, “more interesting is the letters we haven’t seen, with India, the EU, and Taiwan conspicuous examples.”

Trump and other officials have said several times lately that a deal with India is close, while the European Union is also edging toward a framework agreement.

The euro gained 0.1% to $1.1735 on Thursday, while sterling added 0.1% to $1.3605.

The dollar held steady at 146.31 yen and 0.7942 Swiss franc.

Bitcoin crept up 0.3% to around $111,062, inching back towards the all-time high hit overnight of $111,988.90.

“The new record high came on improved risk sentiment,” IG analyst Tony Sycamore wrote in a note to clients.

“While the push to new highs hasn’t yet sparked the fireworks the market might have been hoping for, there is scope for bitcoin to make further gains towards $120,000.”