Dollar Rallies Amidst US-China Trade De-escalation Hopes

The US dollar regained strength after Treasury Secretary Scott Bessent hinted at easing US-China trade tensions. However, President Trump's criticism of the Federal Reserve fuels concerns about its independence, possibly affecting the dollar's status as a reserve currency. Market analysts weigh in on potential impacts.

The US dollar regained some ground on Tuesday following remarks by US Treasury Secretary Scott Bessent suggesting potential de-escalation in US-China trade tensions. In a closed-door meeting at a JP Morgan conference, Bessent emphasized that both nations view the status quo as unsustainable.

The US dollar index rose 0.6% to 98.937 despite plummeting to 97.923 in the previous session, its lowest since March 2022. Analysts like Adam Button from ForexLive noted mounting pressure on the White House to ease tensions, as prolonged conflict might harm the dollar's standing as a reserve currency.

Meanwhile, Trump's attacks on the Federal Reserve and chairman Jerome Powell have raised alarms regarding the central bank's independence. Economic adviser Kevin Hassett stated the administration is considering Powell's removal, although Barclays maintains it's a low-likelihood event.

(With inputs from agencies.)