US Dollar Gains More Than 1% Intraday On US-China Deal
The US Dollar Index (DXY), which tracks the US Dollar (USD) against a basket of six major currencies, rallied more than 1% on Monday (12/05) after China and the United States (US) agreed to a 90-day pause in their trade war by cutting tariffs on both sides. Following discussions over the weekend, US Treasury Secretary Scott Bessent announced a de-escalation of the trade war between the two countries: China will lower its tariffs on US goods to just 10% from the original 125%, while the US will do so to 30% (from 145%) on Chinese goods, both for 90 days, Bloomberg reported. The news sent the US Dollar to its highest level in a month.
Some correlations have re-emerged in the wake of the event, with the 10-year US Treasury yield hitting 4.45%. The widening interest rate differential between the US and other countries makes the Greenback more valuable against the local currencies of countries with lower yields. The impact of this correlation could be that the Federal Reserve’s interest rate cut for 2025 will be fully priced in.
Source: FXSreet
