The dollar index slipped to around 99.6 on Tuesday, logging its third consecutive daily decline as ongoing trade-related uncertainty continued to erode investor confidence and weigh on the greenback.
Dollar remains under pressure
Markets reacted to a mix of geopolitical tensions and policy ambiguity, with US President Donald Trump reiterating that he has no plans to speak with Chinese President Xi Jinping this week—leaving a critical communication channel in limbo. However, Trump added a note of unpredictability by signaling a potential reduction in the existing 145% tariff rate on Chinese imports, suggesting that talks could still progress behind the scenes, even as formal discussions remain stalled.
In a move that further rattled markets, Trump escalated trade tensions by announcing a new 100% tariff on foreign-produced films, aiming to bolster domestic cultural industries. He also hinted that additional levies targeting imported pharmaceuticals could be unveiled within the next two weeks, a development that threatens to disrupt global supply chains and complicate price dynamics in both the healthcare and manufacturing sectors. These abrupt policy shifts heightened concerns about the weaponization of tariffs and the broader economic fallout from an increasingly protectionist agenda.
Investor attention shifts to Fed meeting
Amid this backdrop, investor attention is now firmly focused on the Federal Reserve’s upcoming policy decision. While the central bank is widely expected to leave interest rates unchanged, Chair Jerome Powell’s press conference will be scrutinized for any signals on future monetary policy direction. Market participants are particularly attuned to how the Fed balances its data-dependent stance against mounting political pressure from President Trump, who has repeatedly called for rate cuts to offset the self-inflicted drag from his trade policy. Any sign of dovish leanings could weigh further on the dollar, particularly if coupled with a cautious economic outlook.
Despite the broader weakness in the dollar index, the greenback managed to regain some ground against several Asian currencies, including the Taiwanese dollar and the Malaysian ringgit. This rebound followed a bout of concentrated selling in recent sessions, which had pushed those currencies to multi-week highs. Analysts noted that some of the dollar’s strength in Asia may have been technical in nature, as investors rebalanced portfolios amid month-end flows and sought safety in response to growing uncertainty over regional supply chains affected by the US’s shifting trade posture.
Overall, the dollar’s recent pullback reflects a delicate balancing act between geopolitical developments, domestic political interference, and global monetary policy divergence. With markets jittery and visibility limited, volatility is likely to remain elevated in the coming days.
