Sana Khan
Africa-Press – Lesotho. The U.S. dollar edged lower on Monday as investors bet on a potential cooling of U.S.-China trade tensions, following President Donald Trump’s abrupt shift from tough talk to reassurance over the weekend.
The dollar index =USD, which measures the greenback against six major currencies, slipped 0.1% to 98.908, retreating after Friday’s sharp selloff sparked by Trump’s announcement of 100% tariffs on Chinese imports. The move had briefly rattled global equities and cryptocurrencies before the president’s conciliatory message eased nerves.
“Certainly it’s pretty nervous out there,” said Tim Kelleher, head of institutional FX Sales at Commonwealth Bank in Auckland. “If you look at the U.S. and China stuff, it looks like Trump has done a bit of a TACO again and softened his tone,” he added, referring to the trading joke that “Trump always chickens out.”
Trump’s follow-up post on Truth Social “Don’t worry about China, it will all be fine. The U.S.A. wants to help China, not hurt it!!!” sparked a rebound in Asian markets and risk-sensitive currencies.
Why It Matters
The dollar’s decline signals cautious optimism that the trade war may not escalate further, offering some relief to global investors after months of uncertainty. Both the U.S. and China are navigating slowing growth and cannot afford renewed trade disruptions. A sustained de-escalation could bolster global trade, stabilize commodity prices, and lift risk appetite in emerging markets.
However, confidence remains fragile. Trump’s history of abrupt reversals on economic policy has made traders wary of overreacting to short-term statements, leaving markets in a state of watchful waiting.
The main players in the latest market swing are Washington and Beijing, whose trade relations continue to shape global investor sentiment. U.S. exporters and Chinese manufacturers remain directly exposed to any new tariff decisions.
Financial markets particularly currency traders, commodity investors, and multinational firms are watching closely for policy clarity. The Federal Reserve also remains a quiet stakeholder, as a stronger dollar or rising tariffs could influence its inflation and rate-cut outlook.
What’s Next
Attention now turns to potential follow-up talks between the U.S. and China. Markets will also monitor upcoming U.S. inflation data and Federal Reserve commentary for signs of how monetary policy might respond to trade developments.
If rhetoric on both sides cools, the dollar could extend losses while equities rebound. But any renewed threats from Washington or retaliatory measures from Beijing could quickly reverse the market’s fragile calm and send investors back into safe-haven assets like gold and the yen.
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