US Dollar Gains as Market Sentiment Pressured by US-China Tensions

US Dollar Gains as Market Sentiment Pressured by US-China Tensions

Posted Wednesday, May 27, 2020 by
Arslan Butt • 1 min read

Early on Wednesday, the US dollar is back to trading bullish, gaining strength as a safe haven currency amid rising worries about strained ties between the US and China as China gets ready to impose the national security law on Hong Kong. At the time of writing, the US dollar index DXY is trading around 99.12.

Markets are trading slightly mixed, buoyed by optimism about economies reopening in certain countries even as US-China tensions weigh on the sentiment. While the risk sentiment gets a boost in hopes of recovery beginning as countries resume economic activity, the US’s threat of sanctions on China is supporting the risk-off mood in markets for now.

On Tuesday, US President Donald Trump confirmed that his government will announce new measures against China if it goes ahead with the proposed security bill for Hong Kong. The Chinese parliament is expected to pass this bill on Thursday.

Analysts expect the US dollar to remain supported as a safe haven instrument amid the rising uncertainty about relations between the US and China in the coming days. While commodity currencies have edged lower against the greenback, the euro is holding steady over hopes for a financial recovery fund for European countries being announced soon.

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