The dollar index (DXY00) Tuesday fell by -0.40%. The dollar was under pressure Tuesday because of concerns that a global trade war could derail the economy and force the Fed to cut interest rates. President Trump said he would boost tariffs on China by 50% if it doesn’t remove its 34% tariff on US goods by Wednesday, to which China replied it’s prepared to “fight to the end.” Also, the dollar is facing a confidence crisis as the US renegotiates its relationships with its trading partners, diminishing the dollar’s reserve-currency status and prompting some foreign investors to liquidate their dollar assets. Higher T-note yields Tuesday and hawkish comments from San Francisco Fed President Daly limited losses in the dollar.
Chicago Fed President Goolsbee said some business leaders expressed anxiety about the possibility that tariffs could send the economy back to the conditions of 2021 and 2022 when inflation was “raging out of control.”
