The U.S. dollar went up on Monday against safe-haven currencies like the Japanese yen and Swiss franc. This happened after talks between the United States and China over the weekend helped reduce fears of a major trade war between the two largest economies in the world. Global tensions seemed to cool down as well.
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The dollar, U.S. government bonds, and stocks had been struggling since President Donald Trump’s decision to introduce heavy tariffs last month. This caused a lot of uncertainty around American assets. However, after the talks in Geneva, U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer announced on Sunday that they had reached an agreement with China to reduce the U.S. trade deficit. While details are still unclear, a joint statement is expected soon.
This week, all eyes will be on U.S. earnings reports and economic data, including the consumer price index (CPI) on Tuesday, to see how the trade conflict is affecting the economy. Investors are also waiting to see if the Federal Reserve will cut interest rates further.
Michael McCarthy, CEO of Moomoo Australia, said, “I think it’s too early to say that the U.S. dollar will lose its role as the global reserve currency. We will likely see more normal trading once there is clarity on global trade.” He added that U.S. inflation data and unemployment figures for Australia will be important, but trade talks are expected to be the main focus.
Apart from inflation data, U.S. retail sales for April, due on Thursday, will give more insight into consumer spending. The U.S. dollar rose 0.3% to 145.76 yen and 0.5% to 0.8333 Swiss francs. The dollar index, which tracks the greenback against other currencies, remained steady near a one-month high. However, it is still down 3.5% since the announcement of Trump’s tariffs on April 2.
On the global front, India and Pakistan agreed to a ceasefire over the weekend after several days of fighting between the two nuclear-armed nations, which had shaken up the markets. Also, Ukrainian President Volodymyr Zelenskiy said he was ready to meet Russian President Vladimir Putin in Turkey on Thursday for talks—the first direct talks since the Russian invasion of Ukraine in 2022.
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In other currency movements, the New Zealand and Australian dollars, which are seen as risky investments, rose by 0.4% to $0.5931 and 0.2% to $0.6429, respectively. The euro dropped by 0.2% to $1.1231, and the British pound fell by 0.3% to $1.3288.
Meanwhile, China’s offshore yuan strengthened by 0.2% to 7.2252 yuan per dollar. The progress in U.S.-China trade talks is seen as positive for markets, as it could help improve trade relations with other countries, said Jason Chan, an investment strategist at Bank of East Asia. He added, “If China can make a deal, other Asian countries like Japan, India, and those in Southeast Asia might follow suit and make progress in their own trade talks.”
