The US dollar index continued its decline for the third consecutive day, settling near its lowest level in two weeks, impacted by rising trade tensions between the United States and China, alongside political uncertainty in Washington regarding the tax cut bill proposed by President Donald Trump. The index dropped by 0.43%, recording 99.58 points. Here are the main factors affecting dollar trading today:
Rising trade tensions between Washington and Beijing put pressure on the dollar The US dollar has been significantly harmed due to the latest escalation in the trade war between the United States and China, as the Chinese Ministry of Commerce expressed its rejection of new US restrictions imposed on the semiconductor sector, particularly attempts to prevent the use of Huawei chips outside Chinese territory. Beijing responded by warning that these measures could threaten the temporary trade truce agreed upon for 90 days, which heightened global market concerns and cast a negative shadow on the dollar.
Political uncertainty in the US exacerbates pressure on the currency Pressure on the US dollar has increased due to political uncertainty in the United States, amid difficulties in passing the new tax bill proposed by Trump. The bill aims to extend the tax cuts from 2017, as well as exempt tips and overtime from taxes, and reduce support programs like Medicaid and food assistance.
The bill also includes allocating $50 billion to resume construction of the border wall and $150 billion for military spending, which has sparked division within the Republican Party itself, as the House of Representatives prepares to vote on it this week.
Rising US bond yields soften losses for the dollar Despite the political and trade pressures, the US dollar found some limited support from rising government bond yields, with the yield on 10-year bonds rising to 4.537%, and on 20-year bonds to 5.054%, while the yield on 30-year bonds reached about 5.032%. This rise in yields attracted some investors seeking higher returns, which mitigated the extent of the declines.
Cautious market anticipation ahead of Fed statements and economic data Market attention this week is focused on the upcoming economic data, along with statements from members of the US Federal Reserve, which are expected to play a crucial role in directing future monetary policy expectations. These statements will be vital in determining whether the dollar index will continue to decline or if it will manage to make a temporary rebound.
