The US dollar continues to trade steady, holding firm against other major currencies in the wake of escalating tensions between the US and China over the issue of the national security legislation on Hong Kong. At the time of writing, the US dollar index DXY is trading around 98.94.

The mood in global financial markets has soured once again, sending commodity currencies like the AUD and NZD lower even as stock markets continue to rally over hopes of economic recovery as countries reopen for business. There is an air of caution as China is widely expected to pass the bill, which US Secretary of State Mike Pompeo claims will undermine Hong Kong’s autonomy and freedom.

Meanwhile, tensions are also escalating between China and Australia even as relations threaten to deteriorate between the US and China. According to a recent report on the Financial Times, China is expected to tighten rules on coal imports, which could put strain on Australia.

The safe haven appeal of the US dollar remains in focus as markets await China’s move on Hong Kong and the US’s reaction to such a development. Earlier this week, President Donald Trump had cautioned that his government would announce retaliatory measures by the end of this week if China went ahead with the national security bill.