The U.S. dollar extended losses for a third straight session on Thursday, falling against major currencies including the euro, yen, and Swiss franc, as U.S.-China trade tensions escalated and investors assessed recent comments from Federal Reserve officials.
China accused the United States of “stoking panic” over its rare earth export controls and criticized Treasury Secretary Scott Bessent for making “grossly distorted” remarks about a top Chinese trade negotiator. Beijing also rejected a White House request to ease the restrictions.
“The main story remains U.S.-China trade tensions,” said Matt Weller, head of market research at StoneX. “It appears China is ramping up pressure before the expected meeting between President Xi Jinping and President Donald Trump at the end of the month. The question is whether this is a negotiating tactic or a sign of deeper economic decoupling.”
The dollar index, which tracks the greenback against six major peers, slipped 0.22% to 98.46, marking its third day of declines. The U.S. dollar also fell 0.18% to 0.795 against the Swiss franc, while Treasury yields hovered near multi-week lows, with the 10-year yield just above 4%.
Federal Reserve Governor Christopher Waller reiterated support for another interest rate cut at the Fed’s upcoming policy meeting, citing mixed signals from the U.S. labor market. The Fed’s Beige Book added to the cautious tone, highlighting early signs of economic weakness, such as rising layoffs and slower consumer spending among middle- and lower-income households.
“We’re in a holding pattern right now,” Weller added. “The ongoing U.S. government shutdown, which could last around 40 days, combined with trade tensions, has left traders uncertain about the near-term direction of the economy.”
🇪🇺 Euro Gains as French Political Unrest Eases
The euro reached a one-week high, rising 0.24% to $1.1674, after French Prime Minister Sebastien Lecornu survived the first of two no-confidence votes in parliament. Despite the political turmoil, eurozone bond markets remained stable, with analysts noting limited risk of a French bond selloff without snap elections.
By delaying pension reform until after 2027, Lecornu temporarily defused the political crisis but added complications to France’s fiscal tightening efforts, analysts said.
🇯🇵 Yen Strengthens as Japan’s Politics Shift
The U.S. dollar fell to a one-week low against the Japanese yen, down 0.16% at 151.80. Japan’s Liberal Democratic Party (LDP) began talks with the right-leaning Innovation Party, a move that could help Sanae Takaichi gain support in the upcoming prime ministerial vote next week.
🌏 Asia-Pacific Currencies Mixed
The Australian dollar slipped 0.12% to $0.6502 after data showed unemployment rising to a near four-year high in September, reinforcing expectations for rate cuts by the Reserve Bank of Australia. Analysts noted that the Aussie, often seen as a proxy for global risk sentiment, remains highly sensitive to China-related developments.
Meanwhile, China’s yuan strengthened to a two-week high against the dollar after the People’s Bank of China set its strongest daily midpoint in a year. The yuan last traded 0.06% higher at 7.126 per dollar, supported by improved sentiment in Asian currency markets.
