By Saqib Iqbal Ahmed
NEW YORK (Reuters) -The dollar edged up against the euro on Friday, on pace for its first weekly gain this month, as investors booked profits from the euro’s recent advance ahead of the April 2 deadline for reciprocal U.S. tariffs.
The euro was 0.3% lower at $1.08223, on pace to finish the week down 0.6%, its first weekly loss since February 28.
The dollar, under pressure this year from worries over the hit to U.S. economic growth from the Trump administration’s trade policies, found some respite this week as the Federal Reserve indicated it was in no rush to cut interest rates.
The euro softened as investors booked gains, even as Germany’s Bundesrat, the upper house of parliament, passed a reform of the country’s borrowing rules and a 500-billion-euro fund to revamp its infrastructure and revive Europe’s largest economy.
"It’s really been a huge rally in EUR/USD this quarter ... so, naturally, we’re seeing some profit-taking ahead of the April 2 tariff deadline," said George Vessey, lead FX and macro strategist at Convera.
"Given the lack of reaction to the German Bundestag’s approval of the debt break constitutional change this week, perhaps we’re near peak optimism regarding the fiscal tailwind," he added.
This week the Fed, Bank of England and Bank of Japan left interest rates unchanged as they assessed the economic impact of U.S. President Donald Trump’s trade tariffs against global trading partners.
Fed policymakers signaled two quarter-point cuts later this year, the same median forecast as three months ago.
"We’re not going to be in any hurry to move," Fed Chair Jerome Powell said, underscoring the challenge policymakers face in navigating Trump’s tariffs policy, and the potential impact on the domestic economy.
It remains an open question for the Fed whether tariff plans will lead to persistent inflation, with taxes on intermediate goods, retaliation by other nations, and other factors feeding into whether the central bank will have to respond, Chicago Fed President Austan Goolsbee said on Friday.
"While it is impossible to know exactly what the administration has in mind for its next move (never mind its next U-turn), our base case remains that tariff rates are likely to go up significantly and that this will drive a rebound in the dollar," Jonas Goltermann, deputy chief markets economist at Capital Economics said in a note.
The dollar rose 0.3% to 149.21 yen..
On Wednesday, the Bank of Japan refrained from raising rates and warned of heightening economic uncertainty in the wake of ramped-up U.S. tariffs on trading partners.
Sterling was 0.3% lower at $1.293, a day after the BoE warned that investors should not assume further cuts were guaranteed, given the uncertainty hanging over the global and UK economies.
Bitcoin, the world’s largest cryptocurrency by market cap, was down about 1% at $83,973.