Dollar steadies as markets focus on US-China trade tensions, politic

SINGAPORE: The US dollar recovered from a selloff in early trade on Monday as investors hoped Washington may temper its latest escalation of the trade war with Beijing, while political developments in France and Japan undermined the euro and the yen.

The dollar index, which measures the greenback's strength against a basket of six currencies, edged higher to 99.002, retracing some losses sustained after US President Trump announced 100 per cent tariffs on China.

That revived fears of Trump's Liberation Day rollout of sweeping tariffs in April, sparking a selloff in stocks and cryptocurrencies on Friday.

"Certainly it's pretty nervous out there," said Tim Kelleher, head of institutional FX Sales at Commonwealth Bank in Auckland.

"If you look at the US and China stuff, it looks like Trump has done a bit of a TACO again and softened his tone," he added, referring to a trading rule of thumb that "Trump always chickens out."

Earlier in the day, Trump said: "Don't worry about China, it will all be fine! Highly respected President Xi just had a bad moment," he posted on the Truth Social network. "He doesn't want Depression for his country, and neither do I. The US wants to help China, not hurt it!!!"

Market liquidity may be affected by holidays as the US observes Columbus Day/Indigenous Peoples' Day today, while Japan is also closed to mark Health and Sports Day.

Against the yen, the dollar fetched 151.985 yen, up 0.5 per cent as markets assessed the path ahead for new Liberal Democratic Party leader Sanae Takaichi after Komeito quit the ruling coalition on Friday, dealing a blow to her hopes to become the first female prime minister of the world's fourth largest economy.

The euro stood at US$1.1609, down 0.1 per cent, after the French presidency announced Prime Minister Sebastien Lecornu's new cabinet line-up on Sunday, reappointing Roland Lescure, a close ally of Emmanuel Macron, as finance minister.

Cryptocurrency markets fluctuated between gains and losses after a sharp selloff on Friday, with bitcoin last trading up 0.4 per cent at US$115,486.04. Gold hit a fresh record of US$4,059.30 and was last up 0.8 per cent.

The offshore yuan traded at 7.137 yuan per dollar, tacking on 0.1 per cent in early Asian trade.

The Australian dollar fetched US$0.6513, rising 0.6 per cent in early trade, while the kiwi traded at US$0.57345, up 0.3 per cent.

Sterling changed hands at US$1.33415, up 0.1 per cent so far on the day

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