Dollar at more than two-week high versus yen as trade war intensifies

By Rocky Swift

TOKYO (Reuters) -The dollar strengthened to a more than two-week high against the yen on Wednesday as U.S. President Donald Trump pledged more trade-related proclamations after announcing 25% tariffs on Japan and other trade partners.

The greenback advanced against major peers on Tuesday after Trump's latest threats of tariffs that are now due to start on August 1, but he later said he was open to extensions if countries made proposals.

As the trading day in Asia began, Trump said on social media that there would be announcements on Wednesday regarding "a minimum of 7 countries having to do with trade," without specifying whether the notices would be about deals or more letters explaining the tariff terms.

The dollar index, which measures the greenback against six major peers, is still down more than 6% since the April 2 unveiling of Trump's sweeping "Liberation Day" reciprocal tariffs, which caused markets to swoon and were later mostly postponed to give time to ink bilateral trade deals.

"The market's second take on the reciprocal tariff announcements was actually dollar negative on the view that there was as much harm, or more harm, going to be inflicted on the U.S. from these actions as elsewhere," said Ray Attrill, head of FX strategy at the National Australia Bank.

"It makes markets reluctant to take a kind of positional view as to how this may play out, given uncertainty still reigns," he added.

Adding to the trade turmoil, Trump said he would impose a 50% tariff on imported copper and will soon introduce long-threatened levies on semiconductors and pharmaceuticals.

The European Union will not receive a tariff letter and could secure exemptions from the U.S. baseline rate of 10%, EU sources familiar with the matter have told Reuters.

Export-dependent Japan stands out among major U.S. trading partners as being far away from a deal, and its currency has taken a beating as time runs out. Multiple rounds of talks have failed to result in a breakthrough, and Japanese policymakers are increasingly focused on a critical upcoming election.

Speculation that opposition parties will gain seats in the upper house and push for more fiscal stimulus has sent Japanese government bonds (JGBs) lower this week, causing a spike in long-term yields.

"Talks appear to be stalled over Japan's rice market protections and it's hard to see the Japanese bending on this one," IG analyst Tony Sycamore wrote in a client note. "The (currency) pair's rise was also supported by a fifth day of gains in U.S. yields and a sharp rise in JGB yields on fiscal concerns ahead of Japanese elections on July 20."

U.S. Treasury Secretary Scott Bessent, who has been a key trade negotiator with Tokyo, is expected to attend the World Expo 2025 in Osaka, Japan, later this month, potentially opening the door to more talks.

The dollar climbed 0.4% to 147.12 yen, after touching 147.19, the strongest since June 23. The euro lost 0.2% to $1.1706.

The dollar index rose 0.1%, advancing for a third-straight day. Sterling traded at $1.3569, down 0.2%.

The Australian dollar slid 0.2% to $0.6517, after Tuesday's 0.6% jump. The New Zealand dollar traded at $0.5984, down 0.2%.

(Reporting by Rocky Swift; Editing by Shri Navaratnam and Jamie Freed)