The U.S. dollar regained some ground on Tuesday after steep losses, supported by reports that the Biden administration may ease planned tariffs. However, investor caution lingered, with uncertainty still clouding the path toward meaningful progress in resolving U.S.-China trade tensions.
The White House signaled that it may take steps to soften automotive tariffs, offering some relief to markets. In recent days, both the U.S. and China have shown signs of easing their positions. Washington hinted at reducing duties, while Beijing excluded some American imports from its high levies. Despite these developments, U.S. Treasury Secretary Scott Bessent emphasized that China must act first to de-escalate. This statement added to the mix of conflicting signals surrounding ongoing trade talks.
The U.S. dollar index, which tracks the greenback against major foreign currencies, rose 0.15% to 99.23 after falling 0.58% the day before. Even with the rebound, the index remains on track for its biggest monthly drop since November 2022. Worries over prolonged trade tensions have stoked fears of a global slowdown and pushed investors away from U.S. assets.
George Saravelos, head of global forex research at Deutsche Bank, said recent data showed persistent outflows from U.S. bonds and equities. Despite higher asset prices, foreign investors remain cautious. According to Saravelos, this ongoing “buyers’ strike” reflects deep concern over future returns in the U.S. market.
The euro dropped 0.25% to $1.1393 but is still heading for its largest monthly gain against the dollar in more than two years. As investors reduce exposure to U.S. markets, they have turned to European assets. Stephen Jen of Eurizon SLJ Capital believes the euro could rise to 1.20–1.25, which he considers its fair value based on historical trends.
The dollar gained 0.45% against the Swiss franc, trading at 0.8237, and climbed 0.33% to 142.46 yen. Trading volumes remained low due to a public holiday in Japan. Some analysts expect the yen to strengthen further if the global economy weakens, as central banks may respond with deeper interest rate cuts.
Sterling held near a three-year high at $1.3399, while the U.S. dollar steadied at 99.25 against a basket of currencies. In Canada, the loonie slipped 0.05% to C$1.3840 after Prime Minister Mark Carney’s Liberals won the election but failed to secure a majority. This outcome may complicate trade talks with the U.S.
Market attention is now shifting toward key U.S. economic reports due this week. Investors await the upcoming jobs report and first-quarter GDP figures. The Fed’s preferred inflation gauge, the core PCE, will also be released. These reports could shed light on whether the prolonged trade conflict is beginning to hurt domestic growth.
In other currency movements, the Australian dollar slipped 0.15% after reaching a four-month high of $0.6450. Currency traders continue to respond to the broader risk environment shaped by tariffs, trade policy, and upcoming data.
