Dollar Steady Amid Easing Tensions with China

SINGAPORE – On Tuesday, the dollar remained strong as President Trump’s softened stance on tariffs against China, along with the prospect of upcoming discussions with Chinese President Xi Jinping, sparked optimism about reducing tensions between the two major economies.

Following a tumultuous trading session on Friday, where Trump unexpectedly announced 100% tariffs on Chinese exports to the U.S., the currency markets showed signs of stability early in the Asian trading hours. The more conciliatory tone over the weekend seemed to help calm nerves.

On Monday, U.S. Treasury Secretary Scott Bessent mentioned that Trump intends to meet Xi in South Korea later in October, which seems to have boosted the dollar’s standing. The euro slipped below the $1.16 mark, trading at around $1.1566.

The British pound also dipped slightly, by 0.06%, to $1.3328. Meanwhile, the New Zealand dollar fell to a six-month low at $0.57145.

“There’s a common interest to keep bilateral relations from spiraling out of control. I think both the U.S. and China recognize that they can’t just ignore each other’s influence,” noted Homing Li, a senior macro strategist at Lombard Odier.

“We suspect that continuing to escalate without a clear end goal could be detrimental for both sides. Thus, we think there might be efforts to find an exit strategy,” Li added.

The dollar increased by 0.04% against a basket of currencies, reaching $99.34. The Australian dollar showed little change, standing at $0.6516, while the yen declined by approximately 0.2% to $152.57.

As Japanese markets reopened from a long weekend on Tuesday, stocks rose amid ongoing political uncertainty, primarily due to questions around Sanae Takaichi’s bid to become Japan’s first female prime minister after a coalition partner resigned on Friday. This situation has prevented the yen from dropping significantly, although it remains close to eight-month lows as investors ponder potential significant fiscal spending under a new prime minister.

“Considering the current interest rate disparity between Japan and the U.S., this will likely be a key factor influencing the exchange rate. The dollar/yen shouldn’t be hovering around 152 yen for long; we anticipate a shift in this trend soon,” said Nigel Hu, head of Asian fixed income at First Sentia Investors, optimistically forecasting that the yen will strengthen.

In the crypto world, Bitcoin, which took a hit last week with a fall of over 6% as risk appetite waned, saw a slight decline of 0.36%, trading at $115,380.19.