Dollar drops versus euro and yen amid ongoing US-China trade friction
The U.S. dollar fell against the euro and yen on Wednesday with market sentiment weakened by the continuing trade tensions between the U.S. and China.
Traders analyzed comments from Federal Reserve Chair Jerome Powell for cues on upcoming rate cuts amid a U.S. government shutdown, which has hampered the timely release of key data.
The dollar weakened 0.39% to 151.24 against the Japanese yen and was down 0.49% to 0.797 against the Swiss franc, on track for the second straight session of losses against both safe-haven currencies.
Top U.S. officials, including Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer, blasted China's major expansion of rare earths export controls as a threat to global supply chains.
Greer described China's, opens new tab export controls as a complete repudiation of U.S.-Chinese trade agreements over the past six months although he and Bessent stressed that Washington did not want to escalate the conflict. President Donald Trump had threatened to impose tariffs on China last week in retaliation.
The Chinese commerce ministry defended the rare-earths controls, pointing to a series of U.S. measures on Chinese goods and companies and calling it hypocritical.
The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, fell 0.32% to 98.72, on track for the second consecutive session of losses.
Powell, in a speech on Tuesday, left the door open to rate cuts by saying the U.S. labor market remained mired in low-hiring, low-firing doldrums. He said the absence of official economic data due to the government shutdown has not prevented policymakers from being able to assess the economic outlook, at least for now.
Markets are currently priced for a quarter-point cut at the October 28-29 Fed gathering and another at the following meeting in December, followed by three more cuts next year, according to LSEG data.
The yield on benchmark U.S. 10-year notes fell 1.6 basis points to 4.038%. Wall Street stocks finished mostly higher as companies continued to report strong results as the quarterly earnings season kicked off.
The euro rose 0.35% to $1.1646 after gaining 0.3% in the previous session, supported by the French government's proposal to suspend landmark pension reforms.
"Even if the French political upheaval has started to moderate, outright bullish catalysts are lacking for the euro at this stage," TS Lombard analysts led by Daniel von Ahlen wrote in an investor note. "Meanwhile, the recent performance of the EUR/USD is now on par with the past rallies following maor policy announcements in the euro area, which adds to our tactical caution on the common currency."
The New Zealand dollar edged up only 0.1% to $0.5721, after dipping to a six-month low of $0.56839 on Tuesday. The Aussie climbed 0.39% to $0.651, after falling 0.5% a day earlier, when it touched the lowest since August 22 at $0.64405.
Source: Reuters
