Dollar Falls Amidst Heightened US-China Trade Tensions
The dollar fell against trading partners on Wednesday as markets anticipate the US Federal Reserve rate cut will happen in October amidst US-China trade tensions.
FX data highlighted that the greenback retreated midweek after shows of strength that started last week. The greenback declined to a week low against a basket of currencies after Federal Reserve Chair Jerome Powell signalled further interest-rate cuts and as U.S.-China trade tensions build.
The dollar is heavy today, FX market analysts said, noting that the greenback trades weaker against nearly all the world’s currencies.
The dollar index remains in the range set last week, roughly 98.70-99.55; after approaching the upper end yesterday (almost 99.50), it was sold to a four-day low today at the lower end of the range, near 98.75.
Trade tensions between the US and China continue to run high, with President Donald Trump threatening not to buy China’s used cooking oil in retaliation for Beijing not buying US soy.
The ongoing elevated trade tensions between the US and China continue to be the main talking point across forex market, while investors sell down dollar.
With surging demand for safe haven assets, gold price continues to rise and reached a new record slightly beyond $4218 today. It settled last week around $100 lower.
Contrary to expectations from many, China has not weaponised the exchange rate and instead set the dollar’s reference rate at its lowest level since last November.
US rates were soft before Fed Chair Jerome Powell spoke yesterday and remain soft at the same moment when market participants seem to be demanding a higher premium to hold dollars given the policy uncertainty.
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US-CHINA
President Trump and President Xi Jinping will meet later in October amid renewed trade strain following the United States’ threat to impose additional 100 percent tariffs on China.
The American leader had explained that the new tax, effective early next month, was in retaliation for the Chinese government’s announcement of major expansion of rare earths export controls.
In an interview with Fox Business Network on Monday, U.S. Treasury Secretary Scott Bessent said tensions have “substantially de-escalated” since the communications which were held over the weekend.
President Donald Trump and President Xi Jinping will meet later in October amid renewed trade strain following the United States’ threat to impose additional 100 percent tariffs on China.
The American leader had explained that the new tax, effective early next month, was in retaliation for the Chinese government’s announcement of major expansion of rare earths export controls.
In an interview with Fox Business Network on Monday, U.S. Treasury Secretary Scott Bessent said tensions have “substantially de-escalated” since the communications which were held over the weekend.
The talks will resume when senior officials from both sides meet again this week in Washington D.C. on the sidelines of the World Bank and International Monetary Fund annual gatherings.
Bessent noted that the 100 percent tariff “does not have to happen,” assuring that the United States-China relationship “is good” despite the president’s announcement last Friday.
“President Trump said that the tariffs would not go into effect until November 1,” the Secretary noted. “He will be meeting with Party Chair Xi in Korea. I believe that meeting will still be on.”
