The dollar index edged higher on Tuesday, extending its upward trend ahead of a highly anticipated speech by Federal Reserve Chair Jerome Powell later in the day.
Investors remained cautious as they positioned for potential policy signals, with markets already pricing in a quarter-point rate cut this month and another in December.
However, an escalation in US-China trade tensions could temper the greenback’s gains.
Beijing announced countermeasures against several U.S.-linked subsidiaries of South Korean shipbuilder Hanwha Ocean and launched a probe into the impact of Washington’s Section 301 investigation on its shipping industry. Both nations also began imposing additional port fees on ocean carriers, adding to trade uncertainty ahead of a potential meeting between Trump and Xi in South Korea later this month. Hopes of trade talks could limit any downside risks.
US Treasury yields continued to drift lower, with the 10-year note near recent one-month lows as investors awaited Powell’s remarks for guidance. A dovish tone could drag both the dollar and yields lower, while a more balanced tone might extend the dollar’s recent gains and trigger a modest rebound in yields.
