The U.S. dollar continued its rebound on Thursday, driven by technical buying following an oversold period in April and renewed optimism surrounding potential tariff agreements between the United States and its key trading partners.
Market activity was subdued due to the May Day holiday, which saw many global financial markets closed. Despite the lighter trading volume, the greenback posted notable gains, particularly against the Japanese yen and Swiss franc.
The yen weakened significantly after the Bank of Japan (BOJ) left interest rates unchanged and revised its economic growth forecast downward, citing the impact of U.S. tariffs. The BOJ now projects its 2% inflation target will be met in the latter half of fiscal 2026, a full year later than previously expected. As a result, the yen slid to a four-week low against the dollar, which surged 1.7% to 145.52 yen — marking the dollar’s largest daily gain against the Japanese currency since November 2024.
The euro also made significant moves against the yen, climbing 1.4% to 164.29 yen — its strongest daily performance in two months — as risk sentiment improved across currency markets.
The dollar strengthened broadly as investors grew more hopeful that recent signs of easing trade tensions could lead to concrete agreements. U.S. Treasury Secretary Scott Bessent and White House economic adviser Kevin Hassett indicated on Thursday that discussions were progressing, citing China’s recent reduction of duties on some U.S. goods as a positive signal.
President Donald Trump added to the optimism, stating that “potential” trade deals with India, South Korea, Japan, and even China are likely, fueling hopes that the tariff-driven slowdown may ease in the near term.
Commenting on the shift in tone, Jayati Bharadwaj, global FX strategist at TD Securities, said the Trump administration appears to be signaling a willingness to re-engage diplomatically. “They might have realized they overplayed their hand on tariffs and are now trying to show an openness to negotiation,” she noted.
In European trading, the euro slipped 0.4% against the dollar to $1.1286, while the British pound also declined 0.4% to $1.3284. The U.S. dollar gained 0.6% versus the Swiss franc, trading at 0.8311 francs.
Analysts pointed to stabilizing U.S. Treasury markets as another factor supporting the greenback. “The de-dollarization trend from last month has cooled off,” said Erik Bregar, head of FX and precious metals risk management at Silver Gold Bull. “The dollar is following the bond market closely — once the bond sell-off paused, the dollar found strength.”
Market attention now turns to Friday’s U.S. nonfarm payrolls (NFP) report, expected to offer fresh insights into the Federal Reserve’s next policy move. Wall Street anticipates the addition of 130,000 jobs in April, down from March’s stronger-than-expected 228,000.
Meanwhile, economic indicators released Thursday continued to show signs of strain. Initial jobless claims rose to a two-month high of 241,000 last week, and the Institute for Supply Management (ISM) reported further contraction in the manufacturing sector. The ISM manufacturing PMI fell to 48.7 in April from 49.0 in March, marking a five-month low. Readings below 50 signal contraction.
In commodity-linked currencies, the Australian dollar weakened by 0.3% to US$0.6385, despite recent gains fueled by a stronger-than-expected inflation report earlier in April.
As investors await key employment data and further trade developments, the U.S. dollar appears poised to maintain its recent momentum, barring surprises from Friday’s labor market report.
