USD: Wild moves continue - ING

Markets remain on edge as trade tensions, erratic headlines, and shifting currency dynamics drive sharp moves across asset classes. While some signs of optimism emerge, risks to the US dollar and commodity-linked currencies persist, ING's FX analyst Francesco Pesole notes.

USD safe haven role faces a stress test

"Equity volatility has remained very high and was joined by a selloff in bonds yesterday. After a very weak open, US equities spiked into positive territory on the back of an unconfirmed headline suggesting a 90-day pause in tariffs. Trump quickly labelled it as "fake news" and actually threatened an additional 50% tariff on China if Beijing doesn't lift retaliatory duties. The S&P closed only marginally lower after a rollercoaster ride."

"Newfound tentative optimism has led to a material rebound overnight in the battered commodity currencies. Interestingly, AUD and NZD are the best performers in G10 this morning despite the threat of additional tariffs on China. The reason may lie behind the People Bank of China's decision to fix USD/CNY above 7.20: a bearish signal for the yuan that can take some pressure off the proxies. We discuss the CNY situation in detail below."

"We are seeing the dollar re-establishing its role as a safe haven. Incidentally, it appears that yesterday's spike in Treasury yields was still largely beneficial to the greenback. One key downside risk for the dollar is if Treasuries accelerate their selloff in an environment where equities remain pressured. If that happens independently from other safe-haven sovereign bonds, that could be an early sign of the 'sell America' scenario that can take the dollar substantially lower."