U.S. Dollar Rises as China Tensions Resurface
U.S. Dollar Edges Higher as Markets Weigh Renewed U.S.–China Trade Tensions
The U.S. Dollar (USD) traded with volatility on Tuesday, fluctuating as investors assessed how long the latest flare-up in U.S.–China trade tensions might last.
President Donald Trump appeared to moderate his earlier aggressive stance toward China, softening comments about possible triple-digit tariffs following Beijing’s decision to tighten export restrictions on critical rare earth materials.
While Washington’s tone has turned slightly more conciliatory, lingering concerns persist over the durability of the trade rift between the world’s two largest economies. Beijing recently announced sanctions on five U.S.-linked subsidiaries of South Korean shipbuilder Hanwha Ocean, and both China and the U.S. are set to introduce additional port fees on ocean carriers that move goods ranging from consumer items to crude oil.
By 04:45 ET (08:45 GMT), the U.S. Dollar Index (DXY) edged up 0.1% to 99.36, recovering from earlier losses.
“China’s stepped-up retaliation has rekindled fears of a deeper trade confrontation,” analysts at ING said. “There’s downside risk for the dollar against low-yielding currencies, but for now, markets are primarily unwinding exposure to high-beta assets.”
With the ongoing federal government shutdown curbing new U.S. data releases, traders are eyeing the NFIB Small Business Optimism Index due later Tuesday, along with remarks from Federal Reserve Chair Jerome Powell scheduled later in the day.
Europe: French Political Crisis Adds to Market Uncertainty
In Europe, attention turned to France, where two no-confidence motions—filed from both ends of the political spectrum—are threatening to topple Prime Minister Sébastien Lecornu’s government by the end of the week.
President Emmanuel Macron dismissed calls for his resignation on Monday, though opposition leaders argue that only his departure could resolve the country’s deepening political crisis.
“Unless we see major USD-negative headlines from the U.S., we don’t expect the euro to stage any independent rebound until there’s more clarity on French politics,” ING added.
The euro slipped 0.1% to $1.1558, while sterling weakened 0.5% to $1.3275.
Yen, Franc Gain as Traders Seek Safe Havens
Risk aversion lifted traditional safe-haven currencies, with both the Japanese yen and Swiss franc edging higher against the greenback.
However, yen gains were capped by political uncertainty in Tokyo, where Sanae Takaichi is vying to become Japan’s first female Prime Minister following the collapse of her coalition partner.
Elsewhere, commodity-linked currencies came under pressure. The Australian dollar (AUD)—often seen as a proxy for global risk sentiment—fell 0.9% to $0.6456, while the New Zealand dollar (NZD) also weakened.
