Dollar Dips as U.S.-China Tariff Deal Sparks Currency Rally

The dollar slightly retreated, maintaining most gains amid optimism over a U.S.-China tariff deal. The agreement, which reduced tariffs for 90 days, prompted a market rally, boosting global stocks and the dollar. The yen and euro recovered losses, while U.S. Treasury yields rose, reducing Fed rate cut bets.

The dollar experienced a modest retreat on Tuesday following its surge fueled by optimism around a tariff agreement between the United States and China. The trade deal, which paused for 90 days, offered relief to global markets and bolstered stocks and the dollar.

China's yuan reached a six-month high, propelling the Australian and New Zealand dollars. Meanwhile, other currencies like the yen and euro began to recover from previous declines against the strengthened dollar.

This easing of U.S.-China trade tensions also influenced traders to adjust their expectations concerning Federal Reserve rate cuts, supported by increased U.S. Treasury yields.

(With inputs from agencies.)