The dollar index (DXY00) Monday fell by -0.58% and posted a 1-1/4 month low. Escalation of US-China trade tensions has led to a selloff of the US dollar after China accused the US of violating their recent trade deal by unilaterally introducing new discriminatory restrictions. Also, dovish Fed comments on Monday weighed on the dollar when Fed Governor Waller said he sees a path to Fed interest rate cuts later this year, and Chicago Fed President Goolsbee said if uncertainty around trade policy is resolved, the Fed can cut interest rates. Losses in the dollar accelerated after Monday's US economic news showed the May ISM manufacturing index and Apr construction spending unexpectedly declined.
Escalating trade tensions between the US and China have eroded confidence in the dollar. China's Ministry of Commerce on Monday accused the US of unilaterally introducing new discriminatory restrictions, including new guidelines on AI chip export controls, curbs on chip design software sales to China, and the revocation of Chinese student visas, and vowed to take measures to defend its interests. The latest flare-up threatens to worsen trade relations even after President Trump expressed hope he will speak with Chinese President Xi Jinping this week to accelerate a trade truce.
