U.S. Dollar Strengthens as Markets Eye Softer U.S. China Trade Tone

Highlights:

• The U.S. dollar index rose around 0.1% at the time of writing as investors anticipated renewed U.S.–China trade discussions.
• The yen weakened to ¥152.30 per dollar, while the euro fell below $1.16 amid cautious market sentiment.
• Optimism grew after officials signalled a possible Trump–Xi meeting at the APEC summit, easing tariff-related fears.

Dollar Regains Momentum

The U.S. dollar strengthened on Monday (Tuesday AEDT) as traders brushed off renewed tariff threats from the U.S. President Donald Trump and instead focused on prospects of a fresh trade dialogue with China. At the time of writing, the U.S. dollar index edged about 0.1% higher, reflecting a cautious recovery in sentiment. The Japanese yen weakened to around ¥152.30 per dollar, while the euro slipped below the closely watched $1.16 level. Trading volume remained subdued as U.S. Treasury markets were closed for the Columbus Day holiday, leaving currency movements largely driven by global risk sentiment and trade rhetoric.

Tariff Fears Fade as Diplomatic Signals Improve

Last week’s unexpected warning from President Trump of a “massive increase” in tariffs on Chinese imports had rattled investors, triggering a brief sell-off across global markets. However, the tone shifted over the weekend after both Trump and Vice President JD Vance expressed openness to renewed negotiations with Beijing. According to Treasury Secretary Scott Bessent, a meeting between President Trump and Chinese President Xi Jinping is anticipated at the APEC Summit in South Korea, a development seen as a positive step toward de-escalating trade frictions. The prospect of a direct meeting between the two leaders eased investor concerns and contributed to the dollar’s modest recovery.

Outlook: Trade Talks to Dictate Direction

While the dollar’s modest gains suggest improving confidence, analysts warn that volatility could return quickly if trade relations deteriorate again. The currency’s near-term trajectory will depend on whether diplomatic progress materialises or fresh tariff measures reignite tensions. For now, the greenback’s resilience signals that markets are betting on diplomacy over disruption — at least for the moment.

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