Dollar Holds Gains Amid U.S.-China Trade Deal Optimism

The dollar maintained earlier gains as hope for a U.S.-China tariff deal rose. A pause on tariffs spurred a market rally, but experts warn the dollar might weaken over time. While some currencies strengthened, market analysts remain cautious regarding long-term dollar stability and Federal Reserve actions.

The dollar on Tuesday preserved most of the previous day's gains as optimism grew regarding a potential tariff agreement between the United States and China. The announcement of a pause in tariffs triggered a relief rally across stock and currency markets, propelling the dollar upwards.

Trading against a mix of currencies, the dollar hovered near a one-month high, settling at 101.56. Despite these gains, it remains below levels seen before President Trump's tariff announcement on April 2, which led overseas investors to cut exposure to U.S. stocks and bonds.

While the de-escalation of trade tensions has led traders to reduce expectations for Federal Reserve rate cuts, some market experts, including Societe Generale's Kit Juckes, caution that the dollar's rally may be temporary. Juckes suggested that a long-term weakening of the dollar might occur as over-investment in U.S. assets comes to light.

(With inputs from agencies.)