U.S. Dollar Rebounds as Markets Eye Washington’s Next Move Amid Global Political Shifts

The U.S. dollar regained ground on Monday after an early selloff, as traders speculated that Washington might soften its stance in the escalating trade conflict with China. The dollar index, which tracks the greenback’s performance against six major currencies, edged up to 99.002, recovering from losses sparked by President Donald Trump’s announcement of 100% tariffs on Chinese imports. The move initially revived fears of a repeat of Trump’s “Liberation Day” tariff shock in April, which triggered a selloff across global markets, including stocks and cryptocurrencies.

Market sentiment improved slightly after Trump posted on Truth Social, saying, “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment… The U.S.A. wants to help China, not hurt it!” Investors interpreted the comment as a possible sign of a softer tone from Washington. “It looks like Trump has done a bit of a TACO again and softened his tone,” noted Tim Kelleher, head of institutional FX Sales at Commonwealth Bank in Auckland, referring to the trader adage that “Trump always chickens out.”

Holiday-thinned trading also influenced market moves, with U.S. markets closed for Columbus Day and Japan observing Health and Sports Day. Against the yen, the dollar strengthened 0.5% to 151.985, as investors assessed political uncertainty following Japan’s ruling coalition split. The euro slipped 0.1% to $1.1609 after France unveiled its new cabinet, reappointing Roland Lescure as finance minister. Meanwhile, Bitcoin edged up 0.4% to $115,486.04 after Friday’s sharp drop, and gold hit a new record of $4,059.30. The offshore yuan rose 0.1% to 7.137 per dollar, while the Australian and New Zealand dollars climbed 0.6% and 0.3%, respectively. Sterling also gained 0.1% to trade at $1.33415.