BY COMFORT OGBONNA
The U.S. dollar weakened on Monday after investors reacted to the U.S. Supreme Court’s decision to invalidate a broad range of tariffs imposed by President Donald Trump, a ruling that traders interpreted as potentially supportive for global economic growth. However, uncertainty surrounding replacement trade measures and escalating tensions with Iran kept currency movements cautious and measured.
During the Asian trading session, the euro climbed 0.4% to $1.1820, while the British pound gained 0.3% to $1.3516. Trading volumes were thinner than usual due to a public holiday in Japan and China’s Lunar New Year break. Against the Japanese yen, the dollar fell 0.4% to 154.40. The Swiss franc, traditionally viewed as a safe-haven currency during times of uncertainty, strengthened 0.5% to 0.7727 per dollar.
The Supreme Court ruled on Friday that Trump’s sweeping tariffs exceeded his executive authority, dealing a significant blow to a key pillar of his trade strategy. The president responded forcefully, criticizing the court and announcing a temporary blanket 15% levy on imports. He also insisted that higher-tariff agreements previously negotiated with certain trade partners should remain in place. The new levies are set to run for 150 days, but questions remain about whether the U.S. government will refund importers for duties already collected under the overturned tariffs. The court did not address that issue in its decision.
Currency strategists said the immediate reaction reflected optimism that fewer trade barriers could boost non-U.S. growth. Sim Moh Siong, a currency strategist at OCBC Bank in Singapore, noted that the ruling could weaken the dollar by improving prospects for overseas economies. At the same time, he cautioned that the longer-term foreign exchange implications are less clear. Reduced tariff revenue could weigh on the U.S. fiscal position, potentially pressuring the dollar. Conversely, the court’s move to limit presidential authority may reduce policy volatility, which could be viewed positively by markets.
The New Zealand dollar edged slightly higher, hovering just below 60 U.S. cents. The Australian dollar slipped modestly to $0.7070, reflecting the fact that Australian exports had previously faced only a 10% tariff, making the Supreme Court’s ruling less impactful for Australia compared to other trading partners.
Beyond trade policy, investors are closely watching geopolitical developments. Reports of a U.S. military buildup in the Middle East, aimed at pressuring Iran to abandon its pursuit of nuclear weapons, have added a layer of risk to global markets. The possibility of heightened conflict has supported demand for safe-haven assets and contributed to cautious trading conditions. Market participants are also awaiting Trump’s State of the Union address on Tuesday, which could provide further clarity on the administration’s economic and foreign policy direction.
Analysts warn that the legal battle over tariffs is far from over. Many expect years of litigation and continued uncertainty as the administration explores alternative mechanisms to implement its trade agenda more permanently. Tai Hui, Asia-Pacific chief strategist at J.P. Morgan Asset Management, said the situation underscores the fragile foundation of the administration’s revenue strategy.
He pointed out that while the government continues to pursue ambitious spending plans, some of its revenue sources face significant legal and political challenges. This dynamic, he suggested, could keep bond investors focused on questions of fiscal discipline and long-term budget sustainability.
International reaction has also been swift. The European Commission called on the United States to honor a previously negotiated agreement with the European Union that includes zero tariffs on certain goods such as aircraft and spare parts. Asian trading partners are similarly assessing the implications of the ruling and the newly announced temporary levies, wary of renewed trade tensions and policy unpredictability.
In the months leading up to Trump’s election, many investors had expected tariffs to strengthen the dollar, assuming that other countries would weaken their currencies to offset the impact on exports. However, the currency narrative has shifted. Through 2025, the dollar has declined sharply, with the dollar index dropping more than 9%. Markets have instead focused on the prospect of U.S. interest rate cuts, concerns about the widening fiscal deficit, and unease over abrupt policy changes.
Richard Yetsenga, group chief economist at ANZ, said on the bank’s podcast that the key takeaway from the Supreme Court’s decision is that the administration may now be more constrained in its ability to use tariffs broadly as a policy tool. While this could reduce uncertainty in some areas, he added that it is unlikely to dramatically alter the trajectory of the global economy.
For now, currency markets appear to be balancing optimism about reduced trade barriers with caution over fiscal sustainability and geopolitical tensions. The dollar’s near-term direction will likely depend not only on the evolution of U.S. trade policy but also on developments in the Middle East, interest rate expectations, and the broader outlook for global growth.
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