Dollar Holds Firm as Hopes Rise for U.S.-China Trade De-escalation

The U.S. dollar held steady on Tuesday, supported by signs of easing trade tensions between Washington and Beijing after President Donald Trump softened his stance on tariffs and hinted at a potential meeting with Chinese President Xi Jinping later this month. The shift in tone comes after a volatile Friday session when Trump abruptly announced 100% tariffs on Chinese exports, only to strike a more conciliatory tone over the weekend.

Treasury Secretary Scott Bessent confirmed that Trump remains committed to meeting Xi in South Korea in late October, boosting investor optimism that both nations are seeking a path to defuse tensions. The development breathed new life into the greenback, keeping the euro below $1.16 at $1.1566, while sterling slipped 0.06% to $1.3328. The New Zealand dollar fell to a six-month low at $0.57145.

Homin Lee, senior macro strategist at Lombard Odier, noted that both the U.S. and China appear to be searching for “an off-ramp” to prevent relations from deteriorating further, emphasizing that a prolonged escalation would be costly for both sides. “We suspect there will be an attempt to achieve an off-ramp,” he said.

Against a basket of major currencies, the dollar edged 0.04% higher to 99.34. The Australian dollar was steady at $0.6516, while the yen weakened 0.2% to 152.57 per dollar. Japan’s markets reopened after a long weekend amid political uncertainty following the collapse of a coalition supporting Sanae Takaichi’s bid to become the nation’s first female prime minister. Despite the turbulence, analysts expect the yen to strengthen, with Nigel Foo of First Sentier Investors saying the exchange rate “should not be at 152.”

Meanwhile, bitcoin dipped 0.36% to $115,380.19, extending last week’s 6% slide as risk sentiment waned. Ether also declined 0.77% to $4,256.42, following a broader crypto market selloff that wiped out over $19 billion in leveraged positions.