Dollar mixed but improves tone amid ongoing tariff uncertainty

Rapid shifts in tariff announcements have reduced faith in U.S. policymakers and led investors to look for calmer waters outside of the United States, which last week sent Treasury yields sharply higher and the greenback lower.

“The dollar has been primarily driven by asset flows rather than traditional short-term drivers such as rate differentials,” said Vassili Serebriakov, FX and macro strategist at UBS, adding that “it does appear that the market is driven by a rethink of U.S. exceptionalism.”

Factors driving the move away from the U.S. include “the slowdown in the U.S. economy, uncertainty about tariffs, broader U.S. policy uncertainty, improved sentiment towards Europe, rotations out of U.S. tax, things like that,” Serebriakov said.

Trading this week has so far been relatively calm but investors remain cautious as they wait on further tariff announcements.

"Last week was all about deleveraging, liquidation, and asset re-allocation out of U.S. assets. This week's tone is calmer in what is a holiday-shortened week," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.

Most U.S. markets will be closed for this week’s Good Friday holiday though foreign exchange will remain open.

The greenback is also benefiting from some oversold technical indicators against the single currency, following last week’s sharp decline.

The euro was last down 0.28% on the day at $1.1317, just below last week's three-year high at $1.1473.

German investor morale in April posted its strongest decline since Russia invaded Ukraine in 2022 due to uncertainty unleashed by U.S. tariffs, data showed on Tuesday.

Euro zone banks curbed firms' access to credit last quarter and expect to keep tightening credit standards due to increasing concerns about the economic outlook, the European Central Bank's lending survey showed on Tuesday.

The dollar was flat against the Japanese yen at 143 yen per dollar, not far off Friday's six-month low of 142.05.

Japan will seek full removal of additional tariffs imposed by U.S. President Donald Trump, its top negotiator Ryosei Akazawa said on Tuesday, ahead of his scheduled three-day visit to Washington.

The dollar gained 0.42% to 0.818 Swiss francs after slumping to a 10-year low against the Swiss currency last week.

The more risk-linked currencies enjoyed a bout of strength. Sterling was up 0.29% at $1.3226 after earlier reaching $1.3252, the highest since October 3.

The Australian dollar rose 0.81% to $0.6377 and the New Zealand dollar rose 1% to $0.5934 and earlier reached $0.5943, its highest since November 13.

In cryptocurrencies, bitcoin gained 0.71% to $85,485.