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Dollar in a funk as Trump's deadline for tariffs looms

As the deadline for U.S. president Donald Trump to reach a trade deal looms next week, most Asian equity markets struggled and European stocks appeared set to open lower, despite Wall Street's overnight record highs.

As traders weighed the implications of Trump's expected signing of a sweeping spending bill later that day, the dollar lost some of its gains from Thursday.

U.S. S&P futures dipped by 0.3% after the cash index had risen overnight by 0.8% to a new closing high. Wall Street will be closed for Independence Day on Friday.

The price of STOXX futures in Europe fell by 0.5%.

Trump announced that Washington will begin sending letters on Friday to countries specifying the tariff rates they will be facing on exports into the United States. This is a significant shift from his earlier promises to reach scores of individual agreements before a deadline on July 9, when tariffs may rise dramatically.

Tony Sycamore is an analyst with IG. He said that investors are "just waiting for July 9" and the lack of optimism in the market for trade agreements has contributed to some of the weakness of equity markets, especially those export-dependent Asia, such as Japan and South Korea.

Sycamore stated that the jobs data on Thursday showed that "the U.S. Economy is holding up better than most people anticipated, which indicates to me markets can continue to do well" from here.

Nikkei gained 0.1% at 0550 GMT, after trading in the early hours of the day saw gains and losses. South Korea's KOSPI fell 1.8%.

Hong Kong's Hang Seng fell 0.4% while mainland Chinese blue-chips added 0.7%.

Taiwan's equity benchmark lost early gains and fell 0.9%.

Investors cheered Thursday's surprisingly robust employment report, sending all three major U.S. equity indices soaring in a short session.

The House approved Trump's 869-page signature bill after the vote ended. According to the nonpartisan Congressional Budget Office, this would add $3.4 trillion dollars to the $36.2 trillion national debt.

TRADE IS THE KEY FOCUS FOR ASIA

Trump announced that he expects "a couple" of more trade deals after signing a deal on Wednesday with Vietnam to add to the framework agreements with China, and Britain which are so far his only achievements.

Scott Bessent, the U.S. Treasury secretary, said this week that an agreement with India was close. The White House had once said that agreements with Japan and South Korea would be announced as soon as possible. However, it appears these deals have fallen through.

In a note to clients, Kristina Cliftons, a Commonwealth Bank of Australia strategist, stated that "high tariffs on large economies such as Europe and Japan will increase the narrative of'sell U.S.,' weighing down USD."

The USD would be supported by news of trade agreements ahead of the deadline of 9 July against major currencies such as GBP, EUR, and JPY.

The U.S. Dollar rose overnight by as much as 0.7% against a basket major counterparts after traders backed off any expectation of a Federal Reserve rate cut in this month. It finished Thursday with a 0.4% increase.

The U.S. dollar gave up some of its gains on Friday. It fell 0.4% to 144.31 Japanese yen, and 0.3% to 0.7926 Swiss Franc.

The euro rose 0.2%, to $1.1783, and the pound sterling rose 0.2%, to $1.3681.

The U.S. Treasury Bond market is closed for the holiday on Friday, but the 10-year yields increased 4.7 basis points to 4.34% and the 2-year yield increased 9.3 bps at 3.882%.

Gold rose 0.4% to $3.339 an ounce.

Brent crude futures dropped 21 cents, to $68.59 per barrel. U.S. West Texas Intermediate crude fell 11 cents, to $66.89. (Reporting and editing by Stephen Coates, Kim Coghill, and Kevin Buckland)

(source: Reuters)