By Chibuike Oguh, Yadarisa Shabong and Ankur Banerjee
NEW YORK (Reuters) -The U.S. dollar weakened against the yen on Monday as investors worried about a probable U.S. economic slowdown and a persistent selloff on Wall Street that has been battered by continued policy uncertainty surrounding the Trump administration’s trade policy.
The greenback, however, rose against some of its major peers such as the euro, Swiss franc and sterling, as investors booked profits on recent long positions on those currencies.
Markets overall have been fixated on trade tensions after U.S. President Donald Trump slapped tariffs on top trading partners only to delay some of them for a month amid fears of a U.S. slowdown.
Wall Street stocks fell sharply on Monday, with the Nasdaq dropping more than 4% to a six-month low driving by a selloff in technology, consumer discretionary and communication services stocks.
"The biggest story, besides the dollar and a little of profit-taking going on, is the continued slide in the stock market and dropping U.S. interest rates," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
"The fall in U.S. interest rates last week was thought to be a weight on the dollar and today we’ve got eight to nine basis-point decline in two - and 10-year yields."
The dollar weakened 0.47% to 146.33 against the Japanese yen after trading as low as 146.625 on the session, its lowest since early October last year.
The dollar had fallen for most of the session against another safe haven, the Swiss franc, but the greenback recovered. Against the Swiss franc, the dollar strengthened 0.26% to 0.882 after dropping to its lowest level since early December.
The euro was down 0.08% at $1.0823 against the dollar but hovered near its four-month high as the markets anticipated likely increases to European spending on military aid to Ukraine. The single currency notched its best week in 16 years last week.
Eugene Epstein, head of trading and structured products, North America, at Moneycorp in New Jersey, said: "The major move in the euro has been driven by potential increase in government spending and the likelihood that European Central Bank may be a little more hawkish than they were planning."
Traders are pricing in 75 basis points of cuts from the Fed this year, LSEG data showed, with a rate cut fully priced in for June. Investors will be eyeing U.S. inflation data due on Wednesday.
The yield on benchmark U.S. 10-year notes fell 9.7 basis points to 4.221%. The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 9.6 basis points to 3.906%.
On currency futures markets, investors have slashed net long dollar positions to $15.3 billion from a nine-year high of $35.2 billion in January.
"Reading between the lines, it seems to me that the Trump administration clearly wants a weaker dollar regardless of what they formally say or not," Epstein added.
Data on Monday showed regular pay in Japan rose 3.1% in January following December’s revised 2.6% increase and marking the biggest jump since 1992, though inflation at a two-year high meant real wages fell.
The Bank of Japan is widely expected to keep interest rates unchanged at its policy review on March 18-19, though officials have repeatedly cited the need to gauge the sustainability of wage growth after the central bank’s January rate hike.
The Norwegian crown gained against the dollar and the euro. It was at its strongest against the dollar since October at 10.7833 crowns to the U.S. currency after surging inflation sowed doubts about the central bank’s plans to start cutting borrowing costs in March.
China’s yuan slipped on Monday after data over the weekend showed the consumer price index in February fell at the sharpest pace in 13 months.[CNY/]
The Canadian dollar weakened 0.55% versus the greenback to C$1.4459per dollar. Former central banker Mark Carney claimed a landslide victory on Sunday to lead Canada’s Liberal Party and become its next prime minister, setting him up for a clash with the Trump administration over trade tariffs.
In cryptocurrencies, bitcoin dropped to a four-month low and was down 5.53% at $78,488.64. Ethereum declined 6.99% to $1,905.10 after hitting its lowest since November 2023.