Dollar Takes Drastic Plunges in the Light of U.S- China Trade War

The dollar felt a blow on Tuesday while the possibilities of alleviation in a trade war between the United States and China came down. This substantially hurt the demand for the Greenback.

There was some positive anticipation regarding the US and China getting into a “phase one” agreement deal earlier this month. This would have really loosened up a bit the adamant 16-month trade war between the countries.

But after the fall of the US dollar, China became skeptical about the deal and therefore shattered the hopes for an end to the stagnant growth between the two countries, according to news reports.

After the 0.09% decline, the dollar traded at 108.62 yen. The currency was valued at $1.1074 a euro in Asia on Tuesday, which is considered to be its greatest fall, the lowest in around 2 weeks.

As opposed to sterling, the US currency was worth $1.2956, which is 1 month low.  The pound rose up with censuses implying the success of the Conservatives for the impending elections.

DYX, the index of the dollar updated at 97.808 (a two week low) against 6 primary currencies. The Chinese currency plunged to a 2-week rock bottom in the on-shore market, at 7.0295 a dollar.

The Chinese currency, yuan, also took the plunge with a consistent 2-week low. The Greenback issue exacerbated the situation with uncertainty regarding the resolution of this trade war between the U.S. and China.

The Australian currency also took a downturn not long after the decision to cut rates by the central bankers came out as a result of the Reserve Bank of Australia policy meeting this month.

Junichi Ishikawa, a foreign-exchange official at IG Securities in Tokyo, said:

The dollar tried to break above 109 yen, but it couldn’t because of worries about the trade deal.

He also added,

The Treasury market is starting to reflect similar concerns about the lack of a trade deal. This will keep dollar/yen in a narrow range.

Washington, as well as Beijing, have inflicted taxes on their trade goods due to the exacerbating relations amidst the trade war. According to the US government, Chinese trade methods and rules are unfair.

The taxes slowed the trade worldwide and put forward the risk of a slump in some economies. Some economy professionals even assert that the sluggish global growth is here to stay until the time tariffs are continued.

Amidst all this, a statement from Donald Trump after a meeting went as,

Everything was discussed including interest rates, negative interest, low inflation, easing, Dollar strength & its effect on manufacturing, trade with China, E.U. & others, etc.

The traders of the Currencies also became wary of the dollar following the meeting of U.S. President Donald Trump with Jerome Powell, the U.S. Federal Reserve Chairman on Monday. Trump consistently stands against soaring interest rates.

Australia’s central bank still insisted on the feasibility of another 0.75% cut in cash rate during its November meeting after some obstacles in wage growth, as well as inflation surfaced. But it is also to be noted that this will be the fourth time central bank will cut rates since June reaching an all-time low.