The US dollar experienced a slight pullback on Wednesday, trading near 99 on the dollar index. This followed a significant surge of over 1% in the previous session. Optimism surrounding potential de-escalation in the US-China trade conflict and reduced worries about the Federal Reserve’s independence fueled the initial upward movement. While the dollar relinquished some of its gains, it largely maintained its strength against the euro, yen, and Swiss franc.
- The dollar index eased toward 99 on Wednesday after surging more than 1% in the previous session.
- The previous day’s surge was driven by hopes of de-escalation in the US-China trade war and easing concerns about the Federal Reserve’s independence.
- Treasury Secretary Scott Bessent said the current tariff standoff with China is “unsustainable” and that the Trump administration is not seeking to decouple the two economies.
- President Trump confirmed he has no plans to remove Fed Chair Jerome Powell.
- The dollar still held most of its gains against the euro, yen, and Swiss franc despite Wednesday’s pullback.
This suggests the dollar’s value is sensitive to geopolitical factors, particularly trade relations with China, and perceived political interference with the Federal Reserve. Reassurances from government officials regarding both trade policy and Fed autonomy can provide support for the dollar. However, any renewed escalation of trade tensions or indications of pressure on the Fed could negatively impact the dollar’s valuation. The continued strength against major currencies, despite the easing, indicates underlying support for the dollar, likely bolstered by these reassurances.