The U.S. dollar edged lower on Tuesday but held onto most of its recent gains, supported by optimism over a temporary trade truce between the United States and China.
On Monday, Washington and Beijing agreed to pause their tariff war for 90 days. The move sparked a global market rally, boosting stocks and lifting the dollar.
“This is much better than what the market expected,” said Rodrigo Catril, senior foreign exchange strategist at National Australia Bank. “It shows the U.S. administration is sensitive to how tariffs are affecting the economy. Some might say this is a significant step back from their earlier position.”
China’s yuan climbed to a six-month high, reaching 7.1855 per dollar. The stronger yuan also helped push up the Australian and New Zealand dollars, which often reflect investor sentiment toward China.
The Australian dollar rose 0.64% to $0.6412, while the New Zealand dollar gained 0.55% to $0.5889.
Meanwhile, the Japanese yen and the euro recovered after falling sharply against the dollar on Monday. The yen rose 0.48% to 147.76 per dollar, reversing part of Monday’s 2% drop. The euro gained 0.25% to $1.1114, after sliding 1.4% the previous day.
Catril added that while the largest moves may have passed, the euro and yen still have room to strengthen in the coming weeks.
The Swiss franc gained 0.25% to 0.8429 per dollar, trimming Monday’s 1.6% decline. The British pound edged up 0.16% to $1.3199.
The dollar index, which measures the greenback against a group of major currencies, stayed near a one-month high at 101.54.
The easing of trade tensions has also reduced expectations of interest rate cuts by the U.S. Federal Reserve. With less pressure to support the economy, traders now expect fewer rate reductions this year.
U.S. Treasury yields climbed, with the two-year yield holding near a one-month high at 4.009%. The benchmark 10-year yield was last at 4.4650%.
Market futures now show traders pricing in around 56 basis points of Fed rate cuts by December.
“The Fed is focused on rising uncertainty,” said David Doyle, head of economics at Macquarie. “This agreement may ease some of the downside risks that existed if higher tariffs had remained in place.”
Investors are also watching closely for U.S. inflation data due later Tuesday. Analysts expect both core and headline inflation to have risen in April.
In the cryptocurrency market, bitcoin traded at $102,600 after hitting its highest level since January 31. Ether dipped 1.1% to $2,458.36, but remained close to a more than two-month high reached on Monday.
Related topics:
