By Laura Matthews
NEW YORK (Reuters) -The dollar strengthened against the Japanese yen and the euro on Monday, but was set for its largest quarterly decline since July 2024, as uncertainty around U.S. tariffs kept traders mostly on the sidelines waiting for clarity on President Donald Trump's trade policies.
The safe-haven yen gained traction in early trading before paring those gains, and gold pushed to a fresh peak as investors shunned risk assets ahead of looming tariffs that have clouded the outlook for U.S. inflation and economic growth.
"Markets are worried about the U.S. economy. They're more particularly worried about Trump's tariffs and the effect that they're going to have going forward, because that entire project is undefined," said Joseph Trevisani, senior analyst at FX Street.
"Nobody knows exactly what Trump's going to do. Nobody knows exactly what the response is going to be from the other countries. And more importantly, nobody knows what the economic response is going to be."
Markets are nervous ahead of a new round of reciprocal levies that the White House is due to announce on Wednesday.
Details are scarce, but Trump said late on Sunday that essentially all countries will be slapped with duties this week.
The yen, which strengthened to 148.7 per U.S. dollar at one point on Monday, was last down 0.1% at 149.95 per dollar. The Japanese currency rallied 0.82% against the dollar on Friday, when U.S. data showed core inflation rose more than expected last month, fuelling fears of stagflation. The dollar fell 4.7% this quarter against the yen, its the largest drop since July 2024.
Gold pushed to an unprecedented $3,128.06 per ounce, marking three consecutive sessions in which it has registered record highs.
"I think we all need some certainty around tariffs and trade and taxes, and maybe we'll get much of that come April 2," said Tim Holland, chief investment officer at Orion.
Along with tariffs, investors are in for a busy week with a string of economic reports, including jobs and payrolls data, that could shed much-needed light on how the U.S. economy is holding up under a second Trump presidency.
Federal Reserve Chair Jerome Powell and other central bank officials' speeches this week also could offer clues on the path for U.S. interest rates.
The euro was down 0.17% at $1.0816, though it is set for a roughly 4.5% rise this quarter, its biggest jump since the third quarter of 2022, thanks to Germany's fiscal overhaul.
The likely implementation of U.S. tariffs means Europe will have to take better control of its future, European Central Bank President Christine Lagarde said on Monday, reiterating the impact of tariffs and tit-for-tat measures on the bloc's growth.