Bitcoin and Ether Begin August with Instability as Dollar Index Exceeds 100; Yen Reaches Four-Month Low Before Nonfarm Payrolls Release
Major cryptocurrencies experienced two-way price action early Friday, as the dollar remained steady against major fiat currencies following President Donald Trump’s announcement of new tariffs. Bitcoin (BTC) fell to $114,290, nearly testing the bullish trendline drawn off April and June lows, but has since recovered to trade near $115,900, according to CoinDesk data. Ether (ETH), the second-largest token by market value, mirrored BTC’s price action, recovering from an early drop to $3,616 to trade near $3,690.
The early jitters likely stemmed from Trump’s extensive tariffs and the continuous rise in the dollar index (DXY) to above 100, its highest since late May. The DXY, which tracks the value of the greenback against major fiat currencies, has gained over 3% in four weeks, indicating potential financial tightening that often prompts traders to reduce exposure to riskier assets.
Inflation fears lift DXY
According to Robin Brooks, a senior fellow at the Brookings Institution, signs of tariff-induced inflation in the U.S. are driving the dollar higher. “There’s all kinds of reasons people give why the Dollar has fallen this year. At the root of all that stuff is a simple macro story: tariffs were supposed to lift inflation, and that just didn’t happen as fast as people expected. Well, it’s happening now. Inflation is coming…,” Brooks stated on X.
Late Thursday, Trump announced sweeping tariffs on a global scale. The new order retained the “universal” tariff for goods entering the U.S. at 10%, the level announced on April 2. That rate, however, will apply only to countries with which the U.S. has a trade surplus, while countries exporting more to the U.S. will face a 15% tariff floor. Some Southeast Asian nations have also been hit with larger tariffs.
These additional tariffs are likely to further amplify the inflationary effects of the taxes announced earlier this year. Data released Thursday showed that the impact of the initial tariffs began to show in the Fed’s preferred inflation measure, the core PCE, in June. The personal consumption expenditures price index rose 2.6% year-over-year in June, up from 2.4% in May. The core figure, which excludes the volatile food and energy prices, rose 2.8% year-over-year, matching May’s pace and tied for its highest since February.
The renewed upswing in inflation could complicate the Fed’s ability to cut rates rapidly as desired by President Trump. Earlier this week, the central bank maintained rates at 4.25%, diminishing traders’ hopes for rate cuts in September. “Markets have recalibrated expectations for a September rate cut. According to the CME FedWatch Tool, the odds of a cut next month have fallen to just 41%—down from 58% a week ago and over 75% a month ago. The Fed’s decision to hold rates steady this week and Chair Powell’s call for “greater confidence” in disinflation have clearly resonated,” said Matt Mena, a crypto research strategist at 21Shares.
Mena added that the focus is now on Friday’s U.S. nonfarm payrolls report.
Yen slides ahead of payrolls
The Japanese yen depreciated past 150.50 per dollar in Tokyo morning, hitting its lowest level in four months. The decline follows Thursday’s comments from BOJ Governor Kazuo Ueda, indicating that the Japanese central bank is cautious about implementing an additional rate increase soon.
Both the yen and BTC are likely to experience increased volatility following Friday’s payrolls figures. “The data likely determine whether Powell has the green light to act—or whether the Fed stays sidelined,” Mena noted. “For crypto, looser financial conditions would be a major tailwind. Bitcoin has historically tracked global liquidity with a short lag. If labor data confirms a cooling economy and the Fed pivots, BTC could continue its upward trajectory, with $150K and $200K still in play this cycle.”
