Dollar Falters as US-China Trade Standoff Intensifies

By Stefano Rebaudo and Rae Wee

(Cryptonesia) - The dollar recouped some of its losses on Tuesday, supported by reports that the U.S. administration may ease planned tariffs, although investor caution lingered over whether a meaningful de-escalation in the U.S.-China trade conflict was in motion.

The administration under U.S. President Donald Trump plans to implement measures on Tuesday aimed at reducing the effects of his auto tariffs.

In recent times, both the United States and China appear to have eased their positions somewhat; Washington has shown willingness towards lowering tariffs, while Beijing plans to waive additional charges on certain American goods imported into China.

Nevertheless, U.S. Treasury Secretary Scott Bessent stated that it was China’s responsibility to reduce tensions regarding tariffs—the most recent development amid numerous mixed messages about the advancement of trade discussions between the globe's two biggest economic powers.

The U.S. dollar index, which gauges the currency's strength against a selection of international money, climbed by 0.15% to reach 99.23 following a decline of 0.58% the prior day.

It continued on course for its largest monthly decline since November 2022, fueled by tariff-related worries that sparked concerns about a worldwide economic downturn and eroded faith in American financial instruments.

"According to our findings, there were continuous withdrawals from bonds and equities last week, even as U.S. asset values rebounded," stated George Saravelos, who leads global foreign exchange research at Deutsche Bank.

“What counts for the value of the dollar is essentially the actions of foreign investors, and according to our assessment, they continue to abstain from buying US financial instruments,” he further stated.

A purchasing halt happens when consumers avoid buying particular goods because of unfavorable attitudes.

The euro decreased by 0.25%, trading at $1.1393, yet it was still set for its biggest monthly increase against the dollar in over two years. This occurred as investors moved away from U.S. assets and sought out alternative options in Europe.

" numerous structural elements have bolstered the dollar over recent decades. I doubt these will be dismantled effortlessly," stated Stephen Jen, CEO and co-Chief Investment Officer at Eurizon SLJ Capital.

The euro-dollar could rise as high as 1.20-1.25, though this level has consistently reflected what we calculate to be its true worth.

The US dollar rose by 0.45% compared to the Swiss franc, reaching 0.8237, and increased by 0.33% against the Japanese yen to stand at 142.46. Trading was quiet because of a holiday in Japan.

"In light of the mixed messages, I believe a pact between the U.S. and China is highly improbable in the short term, and China could possibly be gearing up for an extended trade conflict," stated Carol Kong, a currency analyst from Commonwealth Bank of Australia (CBA).

Experts observed that the yen might appreciate more because a worldwide economic downturn could lead key central banks, such as the U.S. Federal Reserve, to enforce larger interest rate reductions, thus reducing the gap in yields compared to Japan.

Sterling remained close to a level not seen in nearly three years at $1.3399. The dollar held steady against a mix of other currencies at 99.25, after declining by 0.6% in the prior day.

In Canada, the loonie weakened by 0.05% to reach CAD$1.3840 following the retention of power by Justin Trudeau’s Liberal Party in Monday's election; however, they did not secure the necessary majority government to assist him in negotiating tariffs with President Donald Trump.

Investors were preparing themselves for a busy week of U.S. economic data, which could offer initial signs of whether President Trump’s trade conflict is having an impact.

The U.S. employment report is set to be published on Friday and is expected to significantly influence market movements. This comes alongside early estimates of economic expansion for the first quarter as well as core PCE numbers—the preferred measure of inflation according to the Federal Reserve—which will also be released prior to this event.

In another development, the Australian dollar declined by 0.15% following its climb to a peak above four months at $0.6450.

(Reported by Stefano Rebaudo and Rae Wee; Edited by Shri Navaratnam, Kim Coghill, and Sherry Jacob-Phillips)