The dollar fell on Wednesday, as investors took in China’s latest plan to levy duties on more than 5,000 US goods worth $60 billion.
The US dollar index, which tracks the greenback’s strength against a basket of other major peers, dropped 0.2 percent to $94.45.
Following Beijing’s retaliatory tariffs announcement, Chinese yuan slightly recuperated losses, although it stayed close to a three-week low. The dollar-yuan pair last stood 0.06 percent lower to 6.8571.
Senior strategist Shinichiro Kadota said it appears as though the markets had already priced that in after media reported that US President Donald Trump is planning to introduce the new tariffs.
The Australian dollar, seen as a proxy to China-related trades and as an indicator of larger risk sentiment, gained 0.5 percent to 0.7257 per dollar.
Against the Japanese yen, the greenback was up 0.03 percent to 112.40.
The Japanese yen, which is widely recognized as a safe-haven currency in times of risk aversion, tumbled near a two-month low of 113.18 earlier in the session as markets’ tariff concerns eased after the new US tariffs got set at 10 percent for the time being rather than the initial plan of 25 percent.
China to Tax $60 Billion of US Products
The dollar experienced losses after China turned the trade war with US a notch higher, announcing on Tuesday that it intends to tax another $60 billion US products in response to Trump’s planned tariffs on $200 billion worth of Chinese imports.
Prior China’s announcement, the US administration has stated that it will start to implement 10 percent duties on about $200 billion of Chinese goods on September 24, with the tariffs to rise up to 25 percent by the end of the year.
The world's second largest economy is set to put its new tariffs into effect on that day as well. China’s Commerce Ministry has also filed a complaint to the World Trade Organization (WTO) against the US new round of levies.
The Trump administration has warned that it would apply tariffs on another $267 billion of Chinese products if China chose to retaliate.
China’s Ministry of Finance said the country will tax a total of 5,207 US goods – ranging from liquefied natural gas to specific types of aircraft as well as cocoa powder and frozen vegetables – at 5 percent and 10 percent, instead of the originally planned rates of 5 percent, 10percent , 20 percent, and 25 percent.
Some analysts and US companies have expressed their concern over the possibility of China carrying out other retaliatory measures such as pressuring US businesses operating in China.
A senior Chinese securities market official stated that trade actions of the US will fail as China has enough fiscal and monetary policy systems to handle the impact, with the government already increasing spending on infrastructure.
While the two countries said they were open to negotiations, several rounds of talks have so far yielded no progress. US Treasury Secretary Steven Mnuchin last week invited top Chinese official to discussions, while China is reportedly considering sending a delegation to Washington for new trade talks.
China is believed to be planning to send Vice Commerce Minister Wang Shouwen to negotiations this month.
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