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Dollar Rises Ahead of Looming U.S., China Tariffs

7/3/2018, 2:08:11 PMBasics of Trading
Dollar Rises Ahead of Looming U.S., China Tariffs

The dollar rose on Tuesday as traders continued to monitor developments on the trade front. The U.S. is set to impose a 25% tariff on $34 billion worth of Chinese goods before on Friday, while China said earlier that it would retaliate with duties on the same value of U.S. products.

The U.S. Dollar Index, which tracks the greenback against a basket of six major currencies, stood at 94.67 by 12:35AM ET (04:35 GMT), up 0.07%.

"There's a strong element of 'risk off' generated by trade concerns behind the dollar's latest rise. That said, the dollar has managed to gain only as emerging market and commodity currencies have slid due to risk aversion," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

"A currency of a country with a large current account deficit is not usually a choice destination during risk aversion, but the dollar is high in liquidity, which is a draw."

Meanwhile, the USD/CNY pair was up 0.53% as the yuan dropped below 6.7 versus the dollar for the first time since Aug. 9, 2017

Chinese state media “The Economic Daily” said the recent sell-off in mainland equity markets was an "irrational overreaction", urging investors not the panic over growing trade tensions between China and the U.S.

"It's a crucial day for the yuan today," said Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong.

"I think the central bank is likely to take out some measures if the onshore yuan closes at weaker than 6.7 per dollar as of domestic close today."

Elsewhere, the USD/JPY pair fell 0.05% to 110.84.