USD has been trading on the front foot today.
Initially, DXY was firmer as a result of the market’s risk averse tone (rising US/China tensions continue to weigh on risk assets). However, the rally has gained traction in recent trade following comments from US President Trump. DXY is now trading in the 100.50 region.
The President said that “it is a great time to have a strong USD”.
One possible explanation as to why this is being interpreted as a positive for USD is this; the President has in the past complained about the dollar being too strong, noting how this puts US exporters at a disadvantage.
As a result, throughout much of 2019, there was speculation that the US administration might act to weaken the USD.
Trump’s comments today look to have been interpreted by the market as Trump, and the US administration, taking this threat off of the table for now.
As noted, the USD is also benefiting from haven demand today (as is JPY). Another reason why USD rallied in wake of Trump’s comments could be a result of further harsh words towards China that he said in the same interview.
Trump reiterated that he is very disappointed in China (in line with some of his recent rhetoric) and stated that he is looking at Chinese companies listed on the NSYE and NASDAQ stock exchanges.
By “looking”, Trump means “we might take action to stop Chinese equities being traded in the US if they don’t comply with US accounting standards”.
To state the plainly obvious, US/China relations are not heading in the right direction. This should be a USD positive.
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