FOREX-Dollar loses ground against safe havens as markets digest trade war drama

By Alun John and Chibuike Oguh

NEW YORK/LONDON, April 10 (Reuters) - The U.S. dollar weakened against the yen, Swiss franc and euro on Thursday but also against more risk sensitive currencies such as the Australian dollar, as markets digested President Donald Trump's dramatic reversal on tariffs.

Trump stunned financial markets on Wednesday by walking back steep duties on trading partners that had gone into effect less than 24 hours earlier. He granted a 90-day freeze on so-called 'Liberation Day' tariffs but maintained a 10% blanket duty on most countries.

Tariffs on Chinese imports, however, were raised to 125% with immediate effect, after Beijing countered previous U.S. duties with an 84% tariff rate.

The U.S. dollar rebounded sharply against the safe-haven Swiss franc and Japanese yen on Wednesday, while Wall Street's main stock indexes leaped as the tariff reprieve brought some relief to investors.

But traders were readjusting their positions on Thursday, with the dollar dropping 2.36% to 144.24 yen JPY=EBS and 3.57% versus the Swiss franc to 0.83710 CHF=EBS, and the benchmark S&P 500 .SPX, Dow .DJI and Nasdaq .IXIC share indexes all lower.

The dollar has fallen 3.82% against the yen and nearly 6.5% against the Swiss franc so far this month. It is on track for the biggest one-day loss against the franc since January 2015.

"Up until yesterday's 90-day reprieve, there was a pretty large dislocation in the market, across all markets in fact, and full adjusting to the tariff regime. But now that there's a pause, every adjustment is basically being re-readjusted," said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey.

Labor Department data on Thursday showed that U.S. consumer prices unexpectedly fell in March although the improvement in inflation is unlikely to be sustained in the wake of tariffs.

A drop in U.S. Treasury yields after a solid 10-year note auction was also partly weighing on the greenback. The yield on benchmark U.S. 10-year notes US10YT=RR fell 4.1 basis points to 4.353%.

European Commission chief Ursula von der Leyen said on Thursday the EU will pause its first countermeasures against U.S. tariffs after Trump's Wednesday move.

The euro was up nearly 2.3% at $1.121250 EUR=EBS, after making its biggest one-day jump since 2022. The pound was up 1.1% at $1.29760. GBP=D3

Risk sensitive currencies were also firmer. The Australian dollar AUD=D3 strengthened 0.98% to $0.6211, while the Swedish crown SEK=D3 rose 1.3% versus the dollar to 9.857 crowns.

China's central bank cut guidance for the official yuan rate for a sixth successive trading session on Thursday, signalling an intention to allow a very gradual depreciation.

Investors are waiting to see whether Chinese authorities use currency depreciation as part of their trade war with the U.S.

The dollar CNH=D3 weakened 0.51% to 7.3057 yuan versus the offshore Chinese yuan but remained above Tuesday's record low of 7.4288 yuan.