Dollar Pulls Back After One-Month High as Markets Question U.S.-China Truce

Dollar Pulls Back After One-Month High as Markets Reassess U.S.-China Tariff Truce

The U.S. dollar eased on Tuesday after reaching a one-month high in the previous session, as investors took a step back to reassess the long-term implications of the temporary U.S.-China tariff truce.

Following Monday’s announcement that the U.S. and China had agreed to a 90-day rollback of certain tariffs, markets initially rallied, boosting risk appetite and pushing the dollar higher. The DXY dollar index climbed to 101.977, its highest level in a month, before pulling back 0.2% to 101.618 as enthusiasm began to fade.

Analysts describe the market reaction as a "bit of a hangover" from the initial optimism. While the agreement between the world’s two largest economies marked a notable step forward in trade negotiations, investors are now questioning the substance and durability of the deal.

“Although recent days have delivered important progress to the table, this does not represent the finish line,” said one strategist. Many market participants remain skeptical about how much ground was actually covered and how long the ceasefire will last, especially given the history of previous trade flare-ups.

The dollar’s dip reflects a broader pause in risk sentiment, as traders turn their attention to upcoming U.S. economic data and developments in the global trade landscape. With inflation figures and central bank outlooks still to come, currency markets are expected to remain volatile in the short term.

For now, the greenback remains supported by relatively strong U.S. fundamentals, but continued uncertainty around trade policy could cap further gains.