Dollar index slightly up as market sentiment stabilizes

The US dollar index edged higher toward the 99 mark on Tuesday, recovering some ground after losses in the previous session as market sentiment steadied despite a backdrop of disappointing economic data and rising trade tensions.

Dollar index slightly up as market sentiment stabilizes

On Monday, data revealed that US manufacturing activity contracted more sharply than expected in May, highlighting the persistent headwinds created by ongoing uncertainty surrounding the Trump administration’s trade policies. This slowdown in factory output underscored concerns about the broader economic impact of tariffs and trade disputes. Trade worries intensified following President Donald Trump’s recent threat to double tariffs on steel imports to 50%, a move that drew sharp criticism from key trading partners and raised fears of escalating global trade conflicts. Diplomatic tensions further escalated between the US and China, as Beijing outright rejected Trump’s accusation that it had violated a temporary trade agreement, responding with promises of retaliatory measures aimed at defending its economic interests. This back-and-forth heightened uncertainty across markets, weighing on investor confidence.

USD shows resilience

Despite these challenges, the US dollar showed resilience, particularly gaining ground against the Japanese yen, Australian dollar, and the euro. The greenback’s strength was supported by its traditional safe-haven appeal amid geopolitical uncertainty and concerns over global growth prospects. Additionally, expectations of potential Federal Reserve policy moves kept investors attentive to the dollar’s trajectory. Looking ahead, investors are focused on a slate of fresh economic data scheduled for release on Tuesday, including job openings, durable goods orders, and factory orders. These indicators will provide critical insights into the underlying health of the US economy and help shape market expectations regarding future monetary policy. In the meantime, the dollar’s ability to hold near recent highs amid trade tensions and economic softening highlights the complex interplay of factors influencing currency markets in this volatile environment.