Investing.com – The US dollar slipped lower Tuesday, heading towards a one-week low following a report that President-elect Donald Trump’s tariffs could be less aggressive, while the euro gains ahead of key inflation data.

At 04:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.3% lower to 107.775, after falling overnight to its weakest since Dec. 30.

Dollar remains on backfoot

The dollar has been on the backfoot since the Washington Post released a report on Monday stating that the new Trump administration was exploring plans to limit tariffs to sectors seen as critical to US national or economic security.

President-elect Donald Trump has denied the report in a post on his Truth Social platform, but the dollar has still struggled to make headway.

“The dollar’s failure to recover all its intraday losses on Monday likely indicates two factors: first, the market had been heavily favoring the dollar following a nearly continuous three-month rally; second, a view that there is no smoke without fire and that the contents of that Washington Post report sounded sensible,” said analysts at ING, in a note.

There is a lot of US economic data to digest Tuesday, including for December and the November , ahead of Friday’s release of the closely watched for further clarity on the health of the world’s largest economy.

“It is unlikely investors will want to consider actively selling the dollar ahead of Trump’s inauguration on 20 January on speculation over softer tariffs – but we could see a little more rebalancing of FX positioning and a little more dollar consolidation in the interim,” ING added.

Euro climbs ahead of inflation data

In Europe, rose 0.4% to 1.0431, climbing once more after jumping to a one-week high on Monday.

Attention turns Tuesday to the release of the latest inflation data out of the eurozone – the last data on regional prices before the European Central Bank’s next meeting on Jan. 30. 

The for December is expected to have risen 2.4% in December on an annual basis, speeding up from 2.2% in November.

However, data released from Spain and Germany showed faster-than-expected pickups in inflation, while France surprised to the downside.

Investors are currently looking for the ECB to ease interest rates by around 100 basis points in the first half of 2025, and any signs that inflation is easing further would give the ECB scope to loosen policy more, weighing on the single currency.

traded 0.4% higher to 1.2569, following sharp gains overnight, despite data showing British house prices dropped unexpectedly last month for the first time since March.

Mortgage lender Halifax said fell 0.2% in December after a 1.2% rise in November, and were 3.3% higher on the year – lower than the 4.2% expected.

The held interest rates unchanged last month after consumer prices rose above target, and is expected to proceed cautiously with further rate cuts this year.

Yuan remains weak

In Asia, rose 0.1% to 7.3325, with the Chinese currency continuing to underperform, hitting its weakest level in 17 years on Monday.

While the currency did recover some ground, it remained fragile, with new US. restrictions against Chinese companies adding more pressure on the currency. 

slipped slightly to 157.56, after earlier hitting its highest level in nearly six months.

Investing.com– Most Asian currencies moved in a tight range on Tuesday as traders gauged the potential for less strict trade tariffs under incoming U.S. President Donald Trump, while the dollar steadied from some overnight losses. 

The Chinese yuan continued to severely lag its peers after its onshore pair hit its weakest level in 17 years on Monday. While the currency did recover some ground, it remained fragile, with new U.S. restrictions against Chinese companies adding more pressure on the currency. 

The dollar also steadied after recouping a bulk of its overnight losses, as a recent report sparked increased speculation over just what Trump’s tariff plans will entail. 

The Japanese yen’s pair rose 0.4% and hit its highest level in nearly six months, while the Australian dollar’s rose 0.2%. Australian data for November is due on Wednesday. 

The South Korean won’s pair fell slightly, while the Indian rupee’s pair steadied after recovering sharply from record highs above 86 rupees. 

Dollar steadies above 1-week low amid tariff speculation

The and rose slightly in Asian trade, recovering from a one-week low hit on Monday. 

The greenback recouped a bulk of its Monday losses after Trump denied a Washington Post report that his administration will impose less strict trade tariffs than initially promised. 

Trump- who is set to take office in less than two weeks- has vowed to impose steep import tariffs against China and other major economies, raising concerns over a renewed global trade war. 

The prospect of more tariffs was a key driver of the dollar’s recent rally, as was growing confidence that the Federal Reserve will cut interest rates at a slower pace in 2025. Hawkish comments from Fed officials furthered this notion over the weekend. 

Focus this week is now on key data for December, due on Friday, for more cues on the U.S. economy and labor market. 

Chinese yuan fragile amid US trade jitters 

The Chinese yuan was the worst-performing Asian currency this week, having touched its weakest level in 17 years on Monday.

The yuan’s onshore pair rose 0.3% on Tuesday, with the Chinese currency remaining fragile in the prospect of more U.S. trade headwinds.

The U.S. on Tuesday added technology giants Tencent Holdings Ltd (HK:) and Contemporary Amperex Technology (SZ:) to a blacklist of companies with ties to the Chinese military, threatening to further strain ties between the world’s largest economies. 

Beijing is expected to dole out even more stimulus measures in the face of a renewed trade war with the U.S.

Focus this week is on , due on Thursday, for more cues on Asia’s biggest economy, as it struggles to shore up growth.

By Chuck Mikolajczak

NEW YORK (Reuters) -The U.S. dollar was lower on Monday in choppy trading after conflicting reports about how aggressive President-elect Donald Trump’s tariff plans could be when he takes office.  

The dollar dropped as much as 1.07% on the session against a basket of major currencies after the Washington Post reported that Trump’s aides were exploring plans that would apply tariffs to every country – but only on sectors seen as critical to U.S. national or economic security, easing concerns about harsher and wider levies.

The dollar then sharply pared declines after Trump denied the report in a post on his Truth Social platform. 

“The reality here is that Trump’s Truth Social views are going to drive FX volatility for a while and (Monday) morning’s reaction is indicative of the underlying dynamics,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

“The market consensus is that Trump’s bark will be worse than his bite, and any news that confirms that concept is fuel for rallying in risk assets and for a decline in the dollar and Treasury yields, but the reality here is that the downside risks remain and there’s no clear endpoint for that,” Schamotta added.

The , which measures the greenback against a basket of currencies, fell 0.64% to 108.26, with the euro up 0.76% at $1.0386. The dollar was on pace for its biggest daily percentage drop since Nov. 27 with the euro poised for its biggest daily gain since Aug. 2.

The dollar index had reached a two-year high of 109.54 last week en route to its fifth straight weekly gain, as the resilient economy, the potential for higher inflation from tariffs and a slower pace of rate cuts from the Federal Reserve have buttressed the greenback. 

The strengthened 0.16% against the greenback to 7.348 per dollar. The dollar reached a 26-month high against the currency last week as China is seen as one of Trump’s major tariff targets. 

Also helping the dollar pare declines were comments from Fed Governor Lisa Cook, who said the Fed can afford to be cautious with any further rate cuts given an economy that is on solid footing and inflation that has been stickier than expected. 

Various Fed policymakers are scheduled to speak this week, and are likely to echo recent comments from other Fed officials that there remains a need to combat the stubborn levels of inflation.

The euro, which hit its lowest level since November 2022 last week, strengthened after annual German inflation rose more than forecast in December, according to preliminary data. 

“There’s a window there for potentially 2%, 3% or 4% correction in the dollar index that could unfold in the next while, but we’d need either a stronger sense that either the European economy’s doing a bit better, so we see a further pick up in European interest rates, or some further moderation in expectations regarding tariffs to drive that,” said Shaun Osborne, chief FX strategist at Scotiabank (TSX:) in Toronto.

U.S. economic data showed new orders for U.S.-manufactured goods fell in November while business spending on equipment appeared to have slowed in the fourth quarter.

Against the Japanese yen, the dollar firmed 0.17% to 157.53 while sterling strengthened 0.72% to $1.251.

Investors will gauge a string of data on the U.S. labor market this week, culminating in Friday’s key government payrolls report. 

The Canadian dollar strengthened 0.74% versus the greenback to C$1.43 per dollar after Canadian Prime Minister Justin Trudeau said he would step down as leader of the ruling Liberals in the coming month.