Dollar shrugs off U.S.-China trade tensions; euro gives up gains
The dollar rebounded from an early fall on concerns about U.S.-China trade tensions on Tuesday, as foreign exchange markets appeared to shrug off worries that the dispute could damage global growth, Reuters reports.
Equity markets in the United States sold off heavily on Monday, and the rush out of risk assets continued into European trading on Tuesday, as investors fled technology shares and trade war worries resurfaced.
The sell-off in U.S. equities came after China imposed extra tariffs on U.S. products, escalating a dispute between the world’s two biggest economic powers.
But there was little sign of contagion from the equity market moves spilling into currencies.
The euro had gained in earlier European trading, but its rise was short-lived after a survey showed the euro zone’s manufacturing boom stumbling for a third month in March, although output remained robust.
The euro was later down 0.1 percent at $1.2292 EUR=.
Against the yen, which tends to benefit in times of economic uncertainty, the dollar snapped three days of losses and rose 0.3 percent to 106.20 JPY= yen.
Asian currencies like the Korean won KRY= and the Taiwanese dollar TWD=, which would be expected to weaken if a trade war hit global growth, have performed relatively well in recent days.
“The equity sell-off that we saw in the U.S. was driven more by the tech sector than concerns about the trade wars. Currency markets are not in the epicenter of this sell-off,” said Alvin Tan, FX Strategist at Societe Generale.
Against a basket of currencies the greenback climbed 0.1 percent to 90.120 .DXY, having spent most of the session below 90.
Analysts said investors were focused on U.S. payrolls data and comments by Federal Reserve Chairman Jerome Powell towards the end of the week, which should help determine the short-term direction of the dollar.