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Dollar Near Highs as U.S. Eyes Further Tariffs on China

10/30/2018, 10:50:46 AMBasics of Trading
Dollar Near Highs as U.S. Eyes Further Tariffs on China

The dollar rose against its rivals Monday on a report the United States planned to slap more tariffs on China, raising investor fears of an escalation in U.S.-China trade tensions.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.25% to 96.37.

Bloomberg News reported that the U.S. is planning on implementing additional tariffs on more Chinese products if upcoming talks between President Donald Trump and Chinese President Xi Jinping falter.

The U.S. has slapped tariffs on $250 billion worth of Chinese goods, about half the value of U.S. imports from the country. China has retaliated with tariffs on $110 billion worth of American exports.

The news sparked a selloff of risk assets as Wall Street gave up gains, but demand for the safe-haven yen was subdued as the dollar held most of its gains.

USD/JPY rose 0.46% to Y112.40.

The dollar was helped by data showing the U.S. consumer spending rose for a seventh straight month in September, reaffirming expectations that a strong consumer would continue to prop up economic growth.

Weakness in both the pound and euro, meanwhile, also helped the greenback tack on gains.

GBP/USD fell 0.19% to $1.2806 after U.K. Treasury chief Philip Hammond gave an upbeat assessment of the UK economy, forecasting the budget deficit to fall to £19.8 billion ($25.34 billion), and touting higher projections for growth and tax receipts over the next couple of years.

The UK budget arrives as investors eye an upcoming rate decision from the Bank of England slated for Thursday, when the central bank is expected to keep interest rates on hold, but detail the conditions necessary for policy tightening.

EUR/USD fell just 0.10% to $1.1391 shrugging of news that German Chancellor Angel Merkel confirmed she would not seek reelection as head of her CDU party. The euro was underpinned by positive news on Italy the S&P Global Ratings affirmed Italy's 'BBB' rating, but lowered the outlook to 'negative' from 'stable'.

USD/CAD, meanwhile, rose 0.20% to C$1.3132 as the loonie came under pressure from easing oil prices.