The dollar index (DXY00) today is down by -1.20% and tumbled to a 3-year low. The dollar is sharply lower today because of concerns that the escalation of the US-China trade war would derail the economy and lead to stagflation. China raised tariffs on all US goods to 125% from 84% in retaliation for the US raising tariffs on Chinese goods to 145%. The dollar is also facing a confidence crisis as the US renegotiates its relationships with its trading partners, diminishing its reserve-currency status and prompting some foreign investors to liquidate their dollar assets. The dollar added to its losses today after the University of Michigan US Apr consumer sentiment index fell more than expected to a 2-3/4 year low. The dollar remained lower today even after US March producer prices unexpectedly eased, a dovish factor for Fed policy.
Hawkish comments today from Minneapolis Fed President Kashkari lifted the dollar off of its lows when he reiterated that the potential inflationary impact of tariffs makes the Fed less likely to lower interest rates, even in the face of a weakening economy.
