The US dollar strengthened against most major currencies as the new developments in trade friction with China unsettled risk assets and prompted investors to seek refuge in safe-haven assets.
Zhitong Finance APP has observed that the US dollar strengthened against most major currencies as the new developments in tariff frictions between the United States and China unsettled risk assets and prompted investors to shift towards safe-haven assets.
The Bloomberg Dollar Spot Index rose 0.3% to its highest level since August 1, moving in tandem with Treasury bonds while equity markets declined. The currency with the largest decline was the Australian dollar, which fell 1% to a near two-month low, while sterling also hit a two-month low following the release of UK employment data.
ING analysts Chris Turner and Francesco Pesole wrote that the US dollar’s “revitalized status” as a safe-haven asset, along with “some additional bullish momentum for the dollar,” could support the currency in the short term. The options market shows that demand for bullish positions in the dollar, particularly against the pound, Australian dollar, and Canadian dollar, has rebounded.
Traders took the opposite approach with the yen, which led gains among G-10 currencies on Tuesday.
Turner and Pesole stated: “If the market finds reasons to ease tensions over Japan’s political situation, the undervalued yen will be well-positioned to benefit from any further escalation.”
Traders are also closely watching an important speech by Federal Reserve Chair Jerome Powell later on Tuesday for clues on whether recent market pricing of the central bank’s outlook has become overly dovish.
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