USD: Optimism over US tariff reversal helps the US dollar to rebound - MUFG

The U.S. dollar is regaining ground amid signals the Trump administration may ease trade tensions by reversing steep tariffs on Chinese imports and providing exemptions for key industries. While optimism is growing, analysts remain cautious about the sustainability of the rebound, MUFG's FX analyst Lee Hardman notes.

Dollar rebounds as confidence in U.S. policy rises

"The US Dollar (USD) has continued to trade at modestly stronger levels after staging a rebound over the last couple of trading days. It has resulted in the dollar index moving back up towards the 100.00-level as it moves further above the year to date low of 97.921 recorded on Monday. The US dollar rebound has been encouraged by recent developments suggesting that the Trump administration is in the process of reversing some of the more disruptive parts of their trade policies."

"On the trade front, there is building optimism that the US will act quickly to reverse tariff hikes on China that recently have reached an 'unsustainable' rate of 145%. According to a WSJ report yesterday, the China tariffs were likely to come down to between roughly 50% and 65%. The administration is also considering a tiered approach similar to the one proposed by the House committee on China last year."

"Recently imports of smartphones and other electronic products were excluded from tariffs. Bloomberg has reported as well overnight that US officials are now considering whether to reduce certain tariffs targeting the auto industry. Another option being studied would be to fully exempt auto parts that comply with the USMCA trade pact."