FxWirePro: Dollar slides over Mnuchin’s comments and China’s trade threat

The dollar index, which is the value of the dollar against a basket of currencies declined to as low as 88.8 yesterday, which is the lowest level for the index since 2014. The FXCM U.S. dollar index, which also represents the value of the dollar against basket 11520, which is the lowest reading since December 2014.The latest selloff was fueled by the U.S. Treasury Secretary Seven Mnuchin’s comments and China’s threat to retaliate against the United States for its recent trade stances.

After the United States announced the imposition of tariffs on solar panels and Washing machines, both of which are export goods of China, China influential state-owned news agency Global Times warned that there would be retaliatory measures for these tricky tariffs. However, an immediate retaliation is unlikely since the impact of tariffs on solar panels unlikely to be much as the value of the solar panels exported to the U.S. from China is just 0.66 percent of its total exports. Speaking after the U.S. decision, China’s Commerce Ministry expressed dissatisfaction with the decision and foreign ministry warned that trade protectionism is a double-edged sword and the wielder also hurts himself while hurting others.

As the dollar index declined in fear of an open trade war with China, the U.S. Treasury Secretary Steven Mnuchin welcomed the weakness saying that a weaker dollar is good for trade and opportunities, which led to further weakness in the index.

With the momentum strongly against the dollar, further slide can’t be ruled out at the moment.