US Dollar's Safe Haven Appeal in Focus Over US-China Tensions

US Dollar’s Safe Haven Appeal in Focus Over US-China Tensions

Posted Friday, May 22, 2020 by
Arslan Butt • 1 min read

Early on Friday, the US dollar continues to refer steady and hold on to its recent gains in the wake of rising US-China tensions against the backdrop of the ongoing coronavirus pandemic. At the time of writing, the US dollar index DXY is trading around 99.51.

The safe haven appeal of the US dollar is back in focus after relations between the two would leaders worsen over US’s allegations that China mishandled the initial phase of the coronavirus outbreak. The US is also planning to encourage its businesses from relocating their supply chains and operations out of China, even as diplomatic tensions escalate after the Trump administration’s recent remarks on Taiwan and Hong Kong.

China is planning to impose a new national security legislation on Hong Kong in the aftermath of last year’s unrest and demonstrations. US President Donald Trump has already cautioned that such a move by China would not be very well received by his government.

Analysts expect the US dollar to remain supported in the coming weeks as long as tensions between the US and China continue to escalate and stay in the spotlight. The optimism in the markets around economies reopening has come under pressure as a result of worsening US-China relations, which is helping the safe haven greenback receive more bids of late.

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