Dollar Strengthens as US-China Tariff Truce Lifts Markets

The U.S. dollar held firm on Tuesday following a surprise tariff relief deal between the United States and China that eased fears of a global recession. The agreement, which includes a 90-day rollback of steep tariffs, sparked a global market rally and boosted the dollar against major currencies.

Rodrigo Catril, senior FX strategist at National Australia Bank, noted the deal was “way better than the market was expecting,” highlighting the U.S. administration’s sensitivity to economic risks from trade tensions.

The dollar surged in the previous session, gaining 2.1% against the yen and 1.6% versus the Swiss franc, before slightly pulling back. It last traded at 148.29 yen and 0.8448 Swiss francs. The euro recovered slightly to $1.1095 after falling 1.4% Monday. Catril suggested the euro and yen may see further weakness in the coming weeks.

Sterling was little changed at $1.3178, while the Australian and New Zealand dollars hovered near recent lows at $0.6374 and $0.5862, respectively. The U.S. dollar index held near a one-month high at 101.67.

The easing of trade tensions also led traders to scale back expectations for Federal Reserve interest rate cuts. U.S. Treasury yields rose, with the two-year yield near a one-month high at 3.9977% and the 10-year yield at 4.4551%. Markets now expect around 56 basis points of Fed cuts by year-end.

David Doyle of Macquarie noted that the Fed’s focus on uncertainty may persist, though the tariff deal reduces some downside risk.

In crypto markets, Bitcoin traded at $102,590.75, near a recent high, while Ether dipped 0.4% to $2,476.21.