The US dollar held onto recent gains on Tuesday after the United States and China announced a pause in tariffs. The announcement sparked a relief rally across stock and currency markets on Monday, pushing the dollar to a one-month high against several major currencies.
China’s yuan climbed to a six-month high, which in turn supported advances in the Australian and New Zealand dollars. These moves reflected a broader risk-on sentiment as investors reacted to the easing of trade tensions.
Despite the immediate strength of the dollar, some analysts warn this rally could be short-lived. They expect a longer-term weakening trend as investors reassess heavy allocations to US assets and diversify into other markets and currencies.
The reduction in trade tensions also tempered expectations for Federal Reserve interest-rate cuts this year, prompting market participants to adjust rates and currency forecasts accordingly.