US Dollar Trades Bullish as US-China Tensions Return Over Hong Kong Proposal

US Dollar Trades Bullish as US-China Tensions Return Over Hong Kong Proposal

Posted Monday, May 25, 2020 by
Arslan Butt • 1 min read

The US dollar is starting the fresh trading week on a bullish note, gaining as a safe haven currency in the wake of escalating tensions between the US and China about Hong Kong and its civil liberties. At the time of writing, the US dollar index DXY is trading around 99.58.

Last week, China announced a proposal to impose a national security legislation on Hong Kong to prevent further unrest and protests, like the ones that took place in 2019. The decision was instantly criticized by the US government, which warned China that such a move could cause the US to retaliate with sanctions and heighten tensions between the two countries.

In response to China’s proposal, the city state of Hong Kong once again witnessed protests by thousands of people who took to the streets. The police resorted to the use of water cannons and tear gas to disperse the gathered crowds, in a repeat of protests seen last year.

The possibility of rising US-China tensions is weighing on the market sentiment and supporting the safe haven appeal of the US dollar. Expect thin trading volumes and volatility on Monday as financial markets across Singapore, Britain and the US remain closed today on account of public holidays.

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