Original article by FXStreet Staff at FXStreet.com
Link: https://www.fxstreet.com/news/us-dollar-index-gathers-strength-above-9750-as-trump-announces-new-tariffs-202507110219
Rewritten and Expanded Article (1000+ words)
Title: US Dollar Index Rises Above 97.50 Driven by Fresh Tariff Announcement from President Trump
The US dollar gained strength on Thursday, lifting the US Dollar Index (DXY) above the key 97.50 level. Market reaction came after President Donald Trump announced new tariffs on Chinese goods, reigniting trade tensions between the world’s two largest economies. Investors responded by seeking the relative safety of the dollar, amid growing uncertainty about the global economic outlook.
Market Summary:
– The US Dollar Index climbed sharply, breaking through the 97.50 threshold.
– President Trump announced 10% tariffs on an additional $300 billion worth of Chinese imports.
– Safe-haven demand for the dollar grew amid renewed worries about global trade.
– US Treasury yields initially dropped as investors fled to safety, before partially stabilizing.
– Equities fell worldwide, with major US indices such as the Dow Jones and S&P 500 posting notable losses.
The announcement came unexpectedly, reversing some of the optimism that had built up following constructive US-China trade talks during the G20 summit in June. The surprise tariff escalation rattled financial markets and led to a quick shift in market sentiment.
Tariff Announcement Details
President Trump’s tweet on August 1st, 2019, revealed the United States would impose a 10% tariff on the remaining $300 billion of Chinese goods not already subject to previous trade measures. This marked a significant escalation in the US-China trade war, as this new round of tariffs would apply to virtually all Chinese exports to the US.
Key points from the announcement include:
– The new tariffs were set to go into effect on September 1st.
– Unlike previous tariffs, the newly targeted goods include consumer products such as smartphones, clothing, toys, and footwear.
– Trump cited China’s failure to follow through on promises to increase agricultural purchases and halt fentanyl exports as a key catalyst for the decision.
– The announcement followed a US delegation’s trip to Shanghai, where trade talks made limited progress.
Market Implications
Reaction in the currency and equity markets was swift. The US dollar gained immediate strength, propelled by investors retreating from riskier assets and positioning in favor of safer alternatives. Gold, also a traditional safe haven, rallied along with the dollar.
Performance across asset classes in response to the tariff announcement:
– US Dollar Index (DXY): Climbed above 97.50, a key resistance level; later peaked around 98.00 before consolidating.
– EUR/USD: Slipped as the dollar gained, hitting lows just under the 1.1030 mark.
– USD/JPY: Fell due to risk-off flows, underscoring investor flight to safety toward the Japanese yen.
– Equities: The Dow Jones fell over 300 points, while the S&P 500 declined by 1.1%.
– Commodities: Crude oil dropped sharply, down more than 6% as concerns grew over global demand.
– Treasuries: Yields on 10-year US Treasury notes fell to roughly 1.88%, reflecting increased bond-buying activity.
US Dollar Index Fundamentals
The DXY, which measures the dollar’s value against a basket of six major currencies, gained strong bid interest as traders weighed the implications of renewed trade friction. The index had previously struggled to maintain momentum above the 97.50 level. However, the shift in global sentiment breathed bullish energy into the dollar.
Factors supporting the rise of the dollar:
– Investor risk aversion due to escalating trade uncertainty.
– Reduced appetite for emerging market currencies and stocks.
– Expectations that new tariffs could negatively impact global growth, particularly for highly trade-dependent economies like Germany and China.
– A surge
Explore this further here: USD/JPY trading.