Dollar Rebounds as U.S.-China Trade Tensions Ease

The U.S. dollar steadied on Tuesday after recent signs that fears of a renewed trade feud between the United States and China were subsiding. Investors responded positively as President Donald Trump dialed back his tariff rhetoric, and hopes grew for a meeting with Chinese President Xi Jinping later this month.
Reuters

Fading Flame of Trade Hostility

Markets had been unsettled following Trump’s abrupt Friday announcement of 100% tariffs on Chinese exports to the U.S., which he later softened over the weekend.
Reuters
The shift in tone helped restore confidence in currency markets, especially for the dollar, which had previously incurred losses.
Reuters

U.S. Treasury Secretary Scott Bessent affirmed that the planned Trump–Xi meeting in South Korea is still on track, signaling a willingness from both sides to de-escalate tensions.
Reuters

Currency Movements and Drivers

The dollar edged up 0.04% on a basket of currencies to 99.34, showing resilience.
Reuters
In bilateral terms:

Euro held under $1.16, trading at $1.1566.
Reuters

British pound dipped slightly to $1.3328.
Reuters

Australian dollar was largely flat at $0.6516.
Reuters

Japanese yen sank ~0.2% to 152.57 per dollar, pressured by Japan’s domestic political uncertainties.
Reuters

Observers noted that any unilateral escalation without a clear endgame would likely harm both the U.S. and China, suggesting efforts toward an “off-ramp” are probable.
Reuters

Japan’s Political Winds and the Yen

Japan’s markets reopened following a long weekend, amid questions over candidate Sanae Takaichi’s bid to become prime minister. The pound-to-yen slide paused amid uncertainty, though the yen remained close to 8-month lows.
Reuters
Analysts see the wide interest rate gap between the U.S. and Japan as unsustainable, and expect yen strength to return.
Reuters

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