The US dollar edged lower on Tuesday as new tariffs imposed by China on US imports took effect, intensifying trade tensions between the world’s two largest economies. The US Dollar Index was down 0.56%. China’s move to impose these tariffs is seen as retaliation to previous tariff threats by the United States.
Despite the rising tensions, some market analysts view these tariff threats as a negotiating tool by the US. In the foreign exchange market, the euro and the Australian dollar gained ground against the US dollar, while the Canadian dollar fell after a rebound on Monday. Global stock markets were also impacted, with disappointing earnings from Alphabet leading to a decline in Wall Street futures.
China tariffs impact on dollar
The dollar’s value against the yen declined sharply after Japanese wage data increased the likelihood of another rate hike. Traders are wagering that Tuesday’s slump in the dollar will likely prove short-lived, given the backdrop of relative US economic strength and the risks that tariffs could drive investors into havens.
The dollar fell as much as 0.7% on the day, snapping six straight sessions of gains. The gauge, which measures dollar sentiment, is pulling back from the highest level since 2022. This level was reached in Asian trading at the start of the week as speculators braced for US tariffs that were scheduled to take effect Tuesday.
Despite this decline, a measure of dollar sentiment in the options market remains near the most bullish toward the dollar in about seven months.
