U.S. Dollar Rises as Trade War Worry Eases

Monday,   21-May-2018   03:19 PM (IST)

The dollar was at new highs this year as trade war tensions between the U.S. and China were put on hold.The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rallied 0.28% to 93.84.The trade war between the U.S. and China is “on hold” as the two work on a trade agreement, U.S. Treasury Secretary Steven Mnuchin said on Sunday. The two countries had been engaged in a tit-for-tat over tariff disagreements over the last few months, but met last week in Washington to discuss their trade differences.The greenback was also supported by bond yields rising to a seven-year high. The yield on the benchmark United States 10-Year Treasury note rose to 3.076 after hitting an overnight high of 3.082.The increase in bond yields, along with positive economic data and rising inflation, has boosted expectations that the Federal Reserve will increase interest rates and tighten monetary policy.The Fed raised rates in March and is expected to raise rates twice more, with some investors expecting a third hike.Expectations of higher interest rates tend to boost the dollar by making the currency more attractive to yield-seeking investors.The dollar rose against the safe haven yen, with USD/JPY increasing 0.48% to 111.29.The euro was down amid political uncertainty in Italy and an equity sell-off, with EUR/USD falling 0.30% to 1.1735.Sterling was also lower amid uncertainty over Brexit talks. GBP/USD was down 0.50% to 1.3403.Meanwhile, the Canadian dollar was higher, with USD/CAD slipping 0.16% to 1.2863.