Dollar Set for Weekly Gain Amid Trade War Hopes

The dollar is on track to record its first weekly increase since mid-March, following China’s decision to grant tariff waivers on certain imports from the United States. This development has sparked optimism that the trade dispute between the world’s two largest economies might be easing.

Throughout the week, the US currency experienced volatility due to inconsistent signals regarding a potential improvement in relations between Washington and Beijing.

Earlier in the week, the US leader hinted at a possible de-escalation of the ongoing tariff battle, mentioning that direct discussions were already in progress.

By Friday, multiple businesses confirmed that China had provided exemptions from its 25% tariffs on specific US imports and was requesting firms to specify eligible goods.

In a recent interview, the US leader stated that his administration is in talks with China to reach a tariff agreement and that the Chinese President had contacted him. However, Beijing has contradicted the US account of the discussions.

The dollar has strengthened against a basket of currencies, rising by approximately 0.2% and is poised for its first weekly gain since mid-March.

According to market strategist Fiona Cincotta, while clarity remains elusive, there are indications that the situation is no longer escalating and may be moving towards de-escalation.

However, even with these exemptions, the lack of overall clarity has prevented a complete reversal of investor outflows from the dollar, which has declined by 4% since the initial tariff announcement on April 2.

Cincotta added that while there has been some recovery, it is too early to declare a full recovery for the dollar.

Safe Havens Decline

The dollar increased by 0.82% against the yen, reaching 143.775, and rose by 0.42% against the Swiss franc, trading at 0.82985 francs.

The euro decreased by 0.24% to $1.1363, while the pound fell by 0.12% to $1.332, despite unexpectedly robust UK retail sales figures.

Earlier in the week, the dollar faced pressure due to the US leader’s comments regarding the Federal Reserve Chair, but it rebounded after he clarified that he had no intention of replacing the central bank head.

Washington has achieved some headway in preliminary trade negotiations with South Korea and Japan.

Following a meeting with the US Treasury Secretary, the Japanese Finance Minister stated that there were no discussions on currency targets, despite accusations that Tokyo was weakening its currency to benefit its exporters.