In a significant development for global financial markets, the U.S. dollar firmly held onto its gains on Tuesday. This positive momentum came as investors celebrated a newly – announced tariff deal between the United States and China. The deal aimed to ease the trade war between the world’s two largest economies, which had been fueling widespread fears of a global recession.
On Monday, Washington and Beijing jointly declared an agreement to reduce the substantial tariffs they had imposed on each other for a period of 90 days. This news triggered a wave of relief across various markets. Global stocks rallied, and the dollar soared in value. Rodrigo Catril, a senior FX strategist at National Australia Bank, commented, “It’s way better than the market was expecting.” He further elaborated that this deal shows the U.S. administration’s sensitivity to the economic impact of tariffs and represents a significant reversal in their previous stance.
US-China Trade Pact Bolsters Dollar
The currency market witnessed a major shift as a result. The yen and the euro were among the hardest – hit currencies against the resurgent dollar overnight. Although the dollar was last down 0.1% at 148.29 yen and fetching 0.8448 against the Swiss franc, it had jumped 2.1% and 1.6%, respectively, against these two currencies in the previous session. The euro, which had tumbled 1.4% on Monday, was up 0.1% at $1.1095. Catril predicted that, while the major moves had already occurred, there was still scope for the euro and the yen to decline further against the dollar in the coming weeks. Other currencies also showed mixed reactions. Sterling was little changed at $1.3178 after a 1% fall on Monday, while the Australian and New Zealand dollars saw slight increases but remained close to recent lows. Against a basket of currencies, the dollar hovered near a one – month high at 101.67.
Dollar Rides High on Trade Deal
The de – escalation of U.S.-China trade tensions also had a ripple effect on other financial sectors. Traders began to reduce their bets on Federal Reserve rate cuts, reasoning that policymakers would face less pressure to ease monetary policy to boost economic growth. Consequently, U.S. Treasury yields rose. The two – year yield steadied near a one – month high at 3.9977%, and the benchmark 10 – year yield was last at 4.4551%. Futures indicated that the markets were now pricing in only about 56 basis points worth of Fed cuts by December. David Doyle, head of economics at Macquarie, noted that while the Fed would still be focused on the increased uncertainty, the trade deal had removed some of the previously prevalent downside risks. In the cryptocurrency market, bitcoin surged to its highest level since January 31 in the previous session and was last traded at $102,590.75. Ether, although it eased 0.4% to $2,476.21, remained close to the over two – month high it reached on Monday. This new U.S.-China trade deal has set in motion a series of changes across multiple financial markets, and market participants will be closely watching for further developments in the coming days and weeks.
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