The US dollar traded near its recent highs on Monday on hopes of possibly averting a trade war between the US and China, but tensions between the two countries has held back its gains.

The US dollar index, which measures the greenback’s strength against a basket of six major currencies, rose by 0.09 percent to $94.53, hovering just below the 95.13 peak reached on Friday.

The yen traded at 110.50 per dollar, falling 0.1 percent, but still stayed near its three-week high of 110.90 marked on Friday. The move came as trade concerns and a strong earthquake in the city of Osaka hurt sentiment for the Nikkei 225 on Monday.

The greenback gained 0.06 percent to 1.3187 against its Canadian counterpart, after hitting a five-week low of 1.3210 last week, while the Swiss franc lost 0.2 percent to 0.9948.

The Australian dollar declined by 0.07 percent to 0.7436, after retreating to a five-week low of 0.7426, while the New Zealand dollar shed 0.06 percent to 0.6945.   

The dollar climbed more than 1 percent last week, following the Federal Reserve’s decision to hike rates from 1.75 percent to 2 percent, and the European Central Bank’s (ECB) announcement of keeping its rates unchanged through next year and its exit from the quantitative easing (QE) program.

The euro was down 0.09 percent to 1.1599, after dropping to a two-week low of 1.1543 on Friday due to the central bank’s statement.

The currency markets also assessed the impact of the first summit meeting between the US and North Korea and the renewed US-China trade tensions.

Senior currency strategist Yukio Ishizuki said the reaction by currencies to the trade developments has been mostly limited, since the US tariff measure and China’s response were in line with expectations.

US-China Trade Tensions Revive, Tariffs to Hardly Impact the Global Economy


Tensions between the two countries was revived after the US decided to move along with imposing tariffs on $50 billion in Chinese products on Friday, presenting more than 800 key imports from China, including autos that would be subject to a 25 percent tariff starting July 6.

That prompted Beijing to respond by announcing its plans to require 25 percent tariffs on 659 US goods, including soybeans, cars, and seafood.

Further escalation of the trade row between the world’s two biggest economies pose a significant risk, but the latest tariffs will hardly harm the global economy and the market also has to think about a situation in which the US and China try to resolve the issue, according to Ishizuki.

Global market strategist Yoshinori Shigemi stated that the trade tensions not only between the US and China, but are also between the US and its allies, as President Donald Trump could put more pressure on other countries, such as Japan and courtiers of the North Atlantic Treaty Organization (NATO).  

Analysts saw the tariffs will not much have of a negative impact on the economy worldwide, especially for the US economy, which is currently in good condition.

In Asia, however, other trade-dependent economies and companies involved with China’s supply industry are concerned over the potential collateral damage they might experience, if global trade hits the brakes, as it could damage growth worldwide and weaken business confidence.

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