U.S. Dollar Rebounds as Trump Softens Tone on China
U.S. Dollar Rebounds as Trump Softens Tone on China; Yen Weakens on Political Uncertainty
Dollar Index Recovers After Trump’s Calmer Remarks on China
The U.S. Dollar (USD) rebounded on Monday after a volatile start to the session, supported by renewed optimism that trade tensions between the U.S. and China may ease following conciliatory remarks from President Donald Trump.
As of 05:56 ET (09:56 GMT), the U.S. Dollar Index (DXY) was up 0.1% at 99.09, recovering from last week’s losses after Trump’s announcement of 100% tariffs on Chinese imports rattled global markets.
Over the weekend, Trump struck a calmer tone, telling markets to “not worry about China,” signaling that Washington did not intend to escalate the dispute immediately. The remarks helped stabilize sentiment, though investors remain cautious given the unpredictable nature of U.S. trade policy.
“We are not convinced that this trade escalation between the U.S. and China is over from [the] social media tweet from Trump,” analysts at MUFG said. “Given the gulf of expectations between both sides, markets could remain volatile in the near term.”
Thin trading volumes are expected on Monday due to Columbus Day and Indigenous Peoples’ Day holidays, though Wall Street stock exchanges remain open. U.S. stock futures point to mild gains in early trading.
EUR and JPY Under Pressure Amid Political Instability
The Euro (EUR/USD) slipped 0.2% after French President Emmanuel Macron reappointed Prime Minister Sebastien Lecornu, who unveiled a mostly unchanged cabinet despite pledges of “renewal and diversity.” Finance Minister Roland Lescure retained his position.
The Japanese yen (JPY) weakened further, with USD/JPY rising 0.7% to 152.18, as Japan observed Health and Sports Day. Political uncertainty weighed on the yen after the Komeito party exited the ruling coalition, casting doubt on Sanae Takaichi’s chances of securing parliamentary backing to become prime minister.
Investors fear that political instability could delay policy continuity and prompt the Bank of Japan (BoJ) to maintain its ultra-loose monetary stance for longer. Analysts warn that fresh trade tensions could also trigger currency volatility and some unwinding of carry trades, where low-yielding currencies are borrowed to invest in higher-return assets.
The Swiss franc also edged lower against the greenback, with analysts noting that the new wave of uncertainty could increase both realized and implied volatility across major assets.
