Dollar on Track for Weekly Loss Amid Escalating Global Tensions
By Rocky Swift
TOKYO, Jan 30 (Reuters) - The U.S. dollar was headed for its second consecutive weekly loss on Friday, pressured by a cocktail of geopolitical strains that have investors seeking alternatives to American holdings. Fresh tariff warnings targeting nations that trade with Cuba added to existing tensions involving Iran, Venezuela, and Europe, casting a shadow over the currency.
The White House confirmed President Donald Trump signed an executive order paving the way for tariffs on countries supplying oil to Cuba. This move compounds market unease already heightened by reports the administration is considering targeted strikes against Iranian security forces, a development that spurred a spike in oil prices and further weighed on the dollar.
"The geopolitical chessboard is getting crowded, and the dollar is paying the price," said Mantas Vanagas, a senior economist at Westpac Group. "Each new flashpoint, from the Caribbean to the Middle East, chips away at the safe-haven appeal of U.S. assets."
On the domestic front, a tentative Senate deal to avert a government shutdown offered a glimmer of stability. Meanwhile, the Federal Reserve's decision to hold rates steady, citing a solid economy with balanced risks, provided only modest support for the greenback.
The dollar index, which gauges the currency against a basket of peers, edged up 0.2% to 96.35 but remained down 1.1% for the week. The euro dipped 0.2% to $1.194, while sterling fell 0.1% to $1.3791. The yen weakened 0.17% to 153.39 per dollar, though its recent battering has been somewhat cushioned by the dollar's broader slide.
In Asia, data showed Tokyo's core consumer price inflation slowed to 2% year-on-year in January, matching the Bank of Japan's target but indicating persistent sluggish price growth. The Australian and New Zealand dollars both softened 0.2% against the greenback.
Market Voices:
"This is a classic risk-off shift," said Eleanor Vance, a portfolio manager at Horizon Capital in London. "The market is reassessing the premium for holding dollars when U.S. foreign policy itself becomes a source of volatility. The Cuba tariffs are a new, unpredictable variable."
"It's sheer chaos," argued Marcus Thorne, an independent forex analyst based in Singapore. "The administration is simultaneously picking fights on multiple continents while talking down its own currency. Investors aren't fleeing to safety; they're fleeing *from* the source of the instability. The 'strong dollar policy' rhetoric from Treasury rings hollow right now."
"We see this as a temporary recalibration," commented David Chen, chief strategist at First Shanghai Bank. "Fundamentals like the Fed's stance and the avoidance of a shutdown are supportive. Once the geopolitical noise settles, the dollar should find a firmer footing, though the path may remain choppy."
"The slight rebound in the index today shows there's still underlying demand," noted Priya Sharma, an economist at Standard Financial. "For export-driven economies in Asia, a weaker dollar provides some welcome breathing room, even if it's born from uncertainty."
(Reporting by Rocky Swift in Tokyo; Editing by Sam Holmes)