LONDON: The dollar held near a one-week low against multiple currencies on Tuesday as investors retreated to the sidelines while concerns grew about an intensifying conflict between the United States and its trade partners, particularly China.
The Chinese currency weakened to a fresh six-month low as expectations grew that Beijing will let the yuan weaken more in coming days to soften the impact of trade tariffs by the US.
“Currency markets are treading water at the moment because of the trade war concerns and in the near term we think the dollar may gain against the Chinese currency and other rivals,” said Alvin Tan, a currency strategist at Société Générale in London.
Risk appetite was broadly muted with relatively safe-haven currencies such as the Japanese yen and the Swiss franc firmly supported, while high-yielding currencies such as the Australian dollar were on the back foot.
With the Chinese yuan in the offshore market plumbing a fresh six-month low against the dollar, Asian currencies also came under selling pressure with a widely-tracked index following the performance of Asian currencies against the dollar down 0.3% on the day.
US Treasury Secretary Steven Mnuchin said on Monday that coming investment restrictions from the department would not be specific to China but would apply “to all countries that are trying to steal our technology.”
However, that statement was contradicted by White House trade and manufacturing adviser Peter Navarro, who said that any investment restrictions proposed by the Trump administration would target China and not other countries.