Dollar loses early gains as US-China tensions rise

The dollar’s initial rebound on Tuesday, October 14, lost steam after new U.S.-China tensions shook investor confidence.

After a brief period of relief from softer tariff news and signs that a U.S.-China leaders’ meeting might take place later this month, Beijing introduced new measures targeting U.S.-linked units of South Korea’s Hanwha Ocean. At the same time, a fresh investigation under the U.S. Section 301 law reignited trade worries, erasing the dollar’s earlier gains. The euro rose to $1.1585 and sterling to $1.3351, while risk-sensitive currencies like the Australian and New Zealand dollars fell. Meanwhile, the yen and Swiss franc strengthened.

U.S.-China trade tension escalated after President Trump’s October 10 announcement of a 100% additional tariff on Chinese imports starting November 1. The cryptocurrency market, operating 24/7, was the first to absorb the shock, resulting in the largest single-day liquidation in its history. Over the weekend, more than $19 billion in leveraged positions were wiped out, liquidating over 1.6 million traders in a cascading crash.