Dollar Soars as Sino-US Trade Truce Lifts Investor Sentiment

The U.S. dollar surged as the U.S. and China temporarily reduced tariffs, easing fears of a trade war. The move boosted investor confidence, impacting global currency markets. Meanwhile, geopolitical tensions eased with a ceasefire between India and Pakistan, and potential talks between Ukraine and Russia.

The dollar surged on Monday following a pivotal agreement between the United States and China to temporarily reduce tariffs, alleviating some fears of an all-out trade war between the two economic giants. The U.S. cut its extra tariffs on Chinese imports to 30% from 145%, while China reduced its duties on U.S. imports to 10% from 125%. The de-escalation surpassed investor expectations, bringing a sense of relief after weekend negotiations.

The greenback's rise particularly impacted safe-haven currencies, increasing 2% against the yen and 1.7% against the Swiss franc. Arne Petimezas from AFS Group noted that President Trump's swift tariff adjustments were unexpected, indicating possible temporary relief. The dollar index also saw a 1% rise against a basket of currencies, achieving a one-month high despite being 2.4% below levels seen before the tariff announcement in April.

As attention shifts to the U.S. CPI figures and retail sales data, traders speculated on the implications for future interest rate cuts by the Federal Reserve. Concurrently, geopolitical tensions appeared to ease with India and Pakistan announcing a ceasefire and Ukraine's readiness to meet with Russian leaders for direct discussions, further supporting positive market sentiment.

(With inputs from agencies.)