Dollar follows Treasury yields lower on US growth worries
Investors flee to safe havens yen and Swiss franc
Asian currencies struggle in the face of US tariffs
Updates to Asia afternoon
By Ankur Banerjee
SINGAPORE, April 3 (Reuters) - The dollar slid broadly on Thursday and the euro firmed after President Donald Trump announced harsher-than-expected tariffs against U.S. trading partners, jolting the markets as investors sought safe havens such as the yen and Swiss franc.
The highly anticipated tariff announcement sent shockwaves through markets, with global stocks sinking and investors scrambling to the safety of bonds as well as gold.
Trump said he would impose a 10% baseline tariff on all imports to the United States and higher duties on some of the country's biggest trading partners. The tariffs will take effect on April 9 and appeared to target about 60 countries.
The new levies ratchet up a trade war that Trump kicked off on his return to the White House, rattling markets as fears grow that a full-blown trade war could trigger a sharp global economic slowdown and fuel inflation.
Trump has already imposed tariffs on aluminium, steel and autos, and has increased duties on all goods from China.
"Eye-watering tariffs on a country-by-country basis scream 'negotiation tactic', which will keep markets on edge for the foreseeable future," said Adam Hetts, global head of multi-asset and portfolio manager at Janus Henderson Investors.
"We've seen the administration have a surprisingly high tolerance for market pain, now the big question is how much tolerance it has for true economic pain as negotiations unfold."
The risk-sensitive Australian dollar AUD=D3 fell 0.49% to $0.62685, while the New Zealand dollar NZD=D3 slipped 0.2% to $0.5733. AUD/
The yen JPY=EBS strengthened to a three-week high against the dollar and was last up 1.3% at 147.39 per dollar, while the Swiss franc CHF=EBS touched its strongest level in four months at 0.8754 per dollar.
Benchmark 10-year Treasury yields US10YT=RR tumbled 15 basis points to a five-month low of 4.04% as investors braced for slower U.S. growth, while interest rate futures priced in a higher chance of interest rate cuts in the months ahead. US/
GROWTH WORRIES
Investors are worried that some U.S. trading partners could retaliate with measures of their own, leading to higher prices.
EU chief Ursula von der Leyen described the tariffs as a major blow to the world economy and said the 27-member bloc was prepared to respond with countermeasures if talks with Washington failed.
Worries about a global trade war have intensified since Trump stepped into the White House in January, combining with a slew of weaker-than-expected U.S. data to stoke recession fears and undermine the dollar.
The dollar index =USD, which measures the U.S. currency against six other units, fell to 102.98, its lowest since mid-October. The index is down more than 4% this year.
Vasu Menon, managing director of investment strategy at OCBC, said the tariffs are likely to weigh down the U.S. economy more than the markets have been expecting.
"But at this juncture the outcome may not be catastrophic, and the U.S. economy may not slip into a recession, especially if we see Trump showing openness to negotiations and dialling back on reciprocal tariffs."
The euro rose nearly 1% to a two-week high of $1.0950, while sterling GBP=D3 rose 0.66% to $1.3097, its strongest level in five months.
Rodrigo Catril, senior currency strategist at National Australia Bank, said the euro's resilience is probably due to Europe focusing on supporting its economy in the face of U.S. tariffs, rather than looking to retaliate.
"So I think the market has liked that approach of calmness and measuredness from Europe."
There was no such reprieve for Asian currencies, with China's onshore yuan CNY=CFXS sliding to its weakest level against the dollar since February 13. China's offshore yuan CNH=D3 also hit a two-month low.
Malaysia's ringgit MYR=, South Korea's won KRW=KFTC and the Thai baht THB=TH all slid against the dollar, while the Vietnamese dong VND= slumped to a record low.
Elsewhere, the Mexican peso MXN= and Canadian dollar CAD=D3 were relatively stable in Asian hours.
Canada and Mexico, the two largest U.S. trading partners, already face 25% tariffs on many goods and will not face additional levies from Wednesday's announcement.
Who is hit hardest by proposed US tariffs? https://reut.rs/4cqkCLO
(Reporting by Ankur Banerjee and Rae Wee in Singapore; Editing by Lincoln Feast and Edmund Klamann)
((ankur.banerjee@thomsonreuters.com;; Mobile - +65 8121 3925;))
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