The U.S. dollar weakened on Monday as traders bet on a more measured stance from Washington following its recent tariff threat against Beijing. The move came after markets tumbled on Friday, though political shifts in France and Japan weighed on both the euro and yen.
The dollar index — a gauge of the greenback against six major currencies — was down 0.1% at 98.908, extending losses from last week. This followed a brief recovery after U.S. President Donald Trump’s announcement of 100% tariffs on Chinese imports triggered a market selloff.
The announcement revived memories of Trump’s sweeping tariff moves earlier in the year and sent both equities and cryptocurrencies sharply lower to end the week.
“Certainly it’s pretty nervous out there,” said Tim Kelleher, head of institutional FX Sales at Commonwealth Bank in Auckland. “If you look at the U.S. and China stuff, it looks like Trump has done a bit of a TACO again and softened his tone,” he added, referring to a trading adage that “Trump always chickens out.”
On Sunday, Trump sought to calm markets after his tariff announcement, posting on Truth Social: “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!”
Holiday-related thin trading could affect liquidity later in the day, with parts of the U.S. observing Columbus Day/Indigenous Peoples’ Day, though stock exchanges will remain open. Japan’s markets were closed for Health and Sports Day.
The euro held steady at $1.1622 in Asian trading after the French presidency unveiled Prime Minister Sebastien Lecornu’s new cabinet, retaining Roland Lescure as finance minister. Against the yen, the dollar climbed 0.5% to 151.89 yen as investors weighed the political outlook for Liberal Democratic Party leader Sanae Takaichi, following Komeito’s exit from the ruling coalition on Friday.
In digital assets, bitcoin swung between gains and losses after Friday’s plunge, last down 0.2% at $114,849.14. Gold hit a new record of $4,068 per ounce, gaining 1.2%. Meanwhile, the offshore yuan advanced 0.2% to 7.1357 per dollar after Chinese export growth picked up in September.
“What China does in response to Trump’s latest tariff announcement will also affect how markets will respond in the coming days,” said Vasu Menon, managing director for investment strategy at OCBC in Singapore. “Both the U.S. and China know that they cannot afford to ratchet up tensions too much, especially after having accomplished so much in trade talks in recent months,” he added. “Ultimately, confrontation between the two superpowers could give way to reason, and the two leaders could prioritise their economies over their egos.”
Elsewhere, the Australian dollar strengthened 0.8% to $0.6525, the kiwi rose 0.3% to $0.5735, and sterling edged up 0.1% to $1.3347.
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