US Dollar Holds Firm as Markets Focus on Trump-Xi Summit
The U.S. dollar strengthened slightly on Thursday as investors monitored developments from a high-profile meeting between U.S. President Donald Trump and Chinese President Xi Jinping in Beijing.
By 07:44 ET, the U.S. dollar index, which measures the greenback against a basket of major currencies, rose 0.1% to 98.57.
At the same time, the euro slipped 0.1% against the dollar to $1.1702, while the British pound also declined 0.1% to $1.3513.
Trump and Xi Signal Positive Tone During Beijing Talks
During a state banquet in Beijing, Trump praised the discussions with Xi as “extremely positive and constructive.”
The U.S. president described Xi as a “friend” and called the reception in China “magnificent.” Trump added that the talks had been beneficial for both nations and invited Xi to visit the United States in September.
“We have a chance to create a future of greater cooperation and prosperity,” Trump stated during the event.
Xi also struck a diplomatic tone, saying he had held an “in-depth exchange of views” with Trump. The Chinese leader emphasized that the United States and China should become “partners, not rivals,” while stressing that stable relations require mutual respect.
Despite the optimistic rhetoric, neither leader revealed specific details about the negotiations, which are expected to include discussions on trade, Taiwan, and artificial intelligence.
Iran War and Strait of Hormuz Crisis Weigh on Global Outlook
While investors closely followed the Trump-Xi summit, concerns over the ongoing Iran conflict continued to cloud the global economic outlook.
The continued closure of the Strait of Hormuz remains a major concern for financial markets. The strategic waterway off Iran’s southern coast normally handles roughly one-fifth of global oil shipments.
The disruption has triggered a sharp surge in oil prices. Brent crude futures climbed above $105 per barrel, compared to levels near $70 before the Iran war began in late February.
The spike in energy prices has intensified fears of rising global inflation, especially after recent U.S. consumer and producer price data pointed to mounting price pressures.
Safe-Haven Demand Supports the US Dollar
The U.S. dollar has benefited from increased safe-haven demand during the Middle East conflict.
Many investors view the greenback as a defensive asset during periods of geopolitical instability. Analysts have also argued that the United States may be partially shielded from the energy crisis due to its status as a major energy exporter.
Analysts at ING said the dollar remains supported because of the lack of progress in the Gulf region. However, they also noted that positive developments from Trump’s China visit could improve market sentiment and limit further gains for the currency.
Federal Reserve Leadership Change Adds to Market Focus
Markets also reacted to leadership changes at the Federal Reserve after the U.S. Senate confirmed Kevin Warsh as the next Fed chair on Wednesday.
Warsh takes over at a time when policymakers are struggling with elevated inflation pressures, which may complicate calls for aggressive interest rate cuts frequently advocated by Trump.
Following the announcement, U.S. Treasury yields moved higher as investors adjusted expectations around future monetary policy.
Chinese Yuan Remains Strong
Meanwhile, China’s currency continued to show strength following the launch of the summit.
The onshore yuan traded near a three-year high, while the offshore yuan hovered around its strongest level in more than three years.
The strong performance of the Chinese currency reflects growing investor optimism surrounding the diplomatic talks between Washington and Beijing.
