A noteworthy development occurred in global markets on Monday as the dollar increased following the announcement of an agreement between the US and China to pause tariffs for 90 days.
US-China Tariff Agreement
U.S. Treasury Secretary Scott Bessent announced on Monday that the United States and China have reached an agreement for a 90-day pause on trade measures. This deal aims to temporarily reduce reciprocal tariffs, potentially easing fears of a trade war between the two largest economies. This comes after weeks of escalating tensions, which began with former President Trump's global tariff announcements on April 2 that sent the markets into a tailspin.
Impact of Trade War on the Dollar and Other Currencies
The dollar's rise following the trade deal announcement marks a significant turnaround from its recent downward trend that commenced with the April tariff announcements. According to Kenneth Broux, senior strategist for FX and rates at Societe Generale, "the dollar was lagging behind other markets in the recovery from the April lows." The greenback demonstrated strength against traditional safe-haven currencies as investors moved away from defensive positions.
Dollar Index Shows Significant Gains
As of 6:06 a.m. EDT on May 12, 2025, the U.S. Dollar Index (DXY) was recorded at 101.63, up 1.29 points or 1.29% from the previous close. The index's sharp upward movement reflects immediate market reaction to the trade deal announcement, showing positive performance across global indices.
The agreement between the US and China to pause tariffs for 90 days represents a significant effort to reduce economic tension and restore market confidence. Ongoing negotiations could influence future economic dynamics.
