The U.S. dollar continued to struggle on Tuesday, hovering near multi-year lows against major currencies as market sentiment remained shaken by the unpredictability of American tariff policies. The dollar edged down to 142.99 yen, close to the six-month low of 142.05 it hit on Friday, while the euro traded at $1.136, just below the three-year high of $1.1474 reached last week.

Despite a slight 0.2% rebound against the Swiss franc, the dollar is still down nearly 8% this month—its steepest monthly drop since December 2008. Investors have grown wary following the U.S. government’s inconsistent moves on trade. Over the weekend, certain electronics, including smartphones, were removed from the U.S. tariff list on China, offering temporary relief.

However, comments from President Donald Trump suggested the changes could be short-lived, fuelling continued uncertainty. Kieran Williams, head of Asia FX at InTouch Capital Markets, remarked that the back-and-forth on tariffs has diminished the dollar’s safe-haven appeal and prompted a shift away from U.S.-based assets. The bond market mirrored these concerns, as the yield on the 10-year U.S.

The treasury note dipped 1.5 basis points to 4.348% after a historic weekly rise. Analysts such as Prashant Newnaha of TD Securities noted that last week was dominated by deleveraging and asset reallocation, though this week has seen a calmer tone amid a holiday-shortened schedule.

Meanwhile, the Federal Reserve has hinted at a possible shift in policy. Governor Christopher Waller acknowledged that the economic shock caused by tariff uncertainty may necessitate rate cuts to prevent a downturn, even if inflation persists. Traders are now pricing in 86 basis points of rate cuts by year-end. The dollar index stood at 99.641, reflecting deepening investor scepticism and setting the stage for its biggest monthly decline since late 2022.