Dollar drops amid Sino-U.S. trade tensions
The dollar index was down 0.16% at 98.512, headed for a weekly decline of 0.33%
The U.S. dollar slid on Thursday as the Sino-U.S. trade war sapped investor sentiment, while growing confidence of the U.S. central bank cutting its policy interest rate this year also weighed on the dollar.
The euro gained 0.14% to $1.1664 in early trade, hitting a one-week high. The yen also firmed to a one-week high of 150.52 per dollar.
The dollar index, which measures the U.S. currency against six major peers, was down 0.16% at 98.512, headed for a weekly decline of 0.33%.
Investor focus has been on the trade spat between the world’s biggest economies, with U.S. officials criticising China’s expansion of rare earth export controls as a threat to global supply chains.
China’s commerce ministry defended the controls, pointing to U.S. measures on Chinese goods and companies and calling U.S. criticism hypocritical.
Amid the tit-for-tat action, U.S. President Donald Trump still expects to meet Chinese President Xi Jinping in South Korea this month, U.S. Treasury Secretary Scott Bessent said.
Vasu Menon, managing director of investment strategy at OCBC, noted the latest trade measures take effect in November after Trump and Xi meet.
If the meeting goes ahead, some of last week’s measures could be toned down or even unwound and presented as successful deliverables, Menon said.
The sides have maintained lower tariffs and continued rare earth flows under a six-month trade truce that has been repeatedly extended for 90-day periods. Bessent has suggested a longer extension was possible.
An extension, rather than a grand bargain that settles all trade issues, is probably the most realistic second-best outcome compared to the alternative of escalation of retaliation, said Joseph Capurso, head of foreign exchange at Commonwealth Bank of Australia.
The Australian dollar slid 0.4% to $0.6485 after data showed unemployment hit a near four-year high in September, adding to the case for interest rate cuts.
The Aussie, often considered a proxy for risk appetite, has been volatile this week due to the trade tension as traditional havens including the Swiss franc gained. The franc was last firmer at 0.7952 per U.S. dollar.