Dollar slips, real plunges as Trump tariffs rattle Brazil

July 10, 2025 (MLN): The U.S. dollar slipped on Thursday, retreating further from its recent two-week peak, as President Donald Trump’s fresh round of tariff threats did little to shake global markets.

Brazil proved an exception, with its currency plunging after Trump proposed a steep 50% levy, sending the real tumbling as much as 2.8% overnight.

The greenback also faced headwinds from a sharp drop in U.S. Treasury yields following a strong auction of 10-year notes on Wednesday, which eased earlier worries around a “Sell America” trend that had weighed on Treasuries, the dollar, and equities simultaneously earlier this year.

Risk appetite was evident across markets, with investors largely discounting the prospect of severe tariff escalations.

This upbeat mood helped propel Nvidia to a historic $4 trillion market cap and lifted bitcoin to a record just below $112,000.

Adding to the optimism were minutes from the Federal Reserve’s latest meeting, which revealed most policymakers still see interest rate cuts as likely later this year.

The dollar index, which tracks the currency against six major peers, eased 0.1% to 97.286, extending Wednesday’s 0.2% decline.

This came after the index briefly touched 97.837 on Wednesday, its highest level since June 25, before losing steam.

Apart from Brazil, Trump’s new letters to trade partners largely reiterated previously flagged tariff levels from his “Liberation Day” plan on April 2.

Trump also indicated he might delay the August 1 implementation deadline if countries present attractive counteroffers.

Initially, Brazil was set for only a baseline 10% tariff, but Trump raised the figure, citing not just trade concerns but also political issues, specifically Brazil’s treatment of ex-president Jair Bolsonaro.

Bolsonaro, a close ally of Trump during their overlapping terms, is currently on trial for allegedly trying to block President Luiz Inacio Lula da Silva from taking office in January 2023.

The Brazilian real dropped to 5.6047 per dollar overnight, its weakest since June 6, and last traded at 5.5826.

“This highlights Trump’s willingness to use tariffs for a broad range of disputes, beyond pure trade fairness,” noted Taylor Nugent, senior markets economist at National Australia Bank, in a client note.

While the latest announcements didn’t stir markets much outside of Brazil, he added, “it’s more intriguing to see which letters haven’t surfaced yet — with India, the EU, and Taiwan notably absent.”

Meanwhile, the euro climbed 0.2% to $1.1747 and the British pound gained 0.2% to $1.3612. The dollar slipped 0.3% to 145.84 yen and also fell 0.3% to 0.7922 Swiss franc.

Bitcoin edged up 0.3% to around $111,114, close to its fresh all-time high of $111,988.90 hit overnight. “Improved risk sentiment drove the latest record,” IG analyst Tony Sycamore said in a note.

While the move didn’t trigger the explosive rally some had anticipated, he added, there’s still room for bitcoin to push toward $120,000.

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