The dollar index climbed above the 99 mark on Wednesday, extending a 0.7% gain from the previous session, as markets reacted positively to signs of easing political tensions surrounding the Federal Reserve and renewed optimism over U.S.-China trade relations.
Dollar gains for second day
The uptick comes after a period of sustained weakness in the greenback, which had been under pressure from mounting concerns over central bank independence and the broader macroeconomic outlook.
President Trump's recent comments — affirming that he has no plans to remove Fed Chair Jerome Powell — helped calm investor fears about political interference in U.S. monetary policy, a key factor that had been weighing on the dollar’s credibility. His conciliatory tone toward China, including remarks that he plans to be “very nice” in upcoming trade negotiations, further bolstered sentiment and supported the dollar’s rebound.
Additionally, Treasury Secretary Scott Bessent’s acknowledgment that the current tariff impasse with China is “unsustainable” and his call for prompt de-escalation added fuel to the rally. His remarks suggested a possible pivot in trade strategy, one that could reduce uncertainty and help stabilize markets after months of heightened volatility.
DYX remains down by 9% YtD
Despite the recent strength, the dollar index remains down approximately 9% year-to-date, reflecting a broader erosion of its safe-haven appeal. Investors have increasingly shifted toward alternative assets such as gold, the euro, and select emerging market currencies, as ongoing recession fears, geopolitical risks, and political pressure on the Fed have cast doubts over the dollar’s long-term dominance.
While the greenback's latest recovery is encouraging for dollar bulls, analysts caution that any lasting strength will likely depend on clearer policy signals from the Fed and tangible progress in trade talks with China. Until then, the dollar may remain vulnerable to further swings in sentiment driven by political headlines and macroeconomic data surprises.
