The US Dollar regained strength on Thursday, recovering most of Wednesday’s losses and climbing back above the 99.00 mark. Renewed trade tensions between the US and China weighed on market sentiment, prompting investors to shift towards safer assets ahead of the upcoming US Consumer Price Index (CPI) report scheduled for Friday.
The USD Index, which tracks the Greenback against a basket of major currencies, edged higher after President Donald Trump announced that the US is considering new restrictions on software exports to China, further escalating trade frictions.
Trade Tensions Boost Safe-Haven Demand
According to Reuters, US authorities are drafting a plan to curb imports of software-related products—ranging from laptops to jet engines—in response to China’s decision to limit exports of rare earth materials to the US and its allies.
This development has dampened risk appetite and lent support to the Dollar. Despite the tensions, President Trump expressed optimism about an upcoming meeting with Chinese Premier Xi, where a potential agreement could help ease trade uncertainties.
Yen Weakens as Japan Plans Stimulus
In other developments, reports suggesting that Japan’s new government is preparing a USD 90 billion stimulus package to cushion households against rising inflation pressured the Yen, providing additional support to the US Dollar.
Focus Shifts to US Inflation Data
The Dollar’s upside remains capped for now as traders adopt a cautious stance ahead of Friday’s CPI data for September. Headline inflation is expected to climb above 3%, while the core CPI is projected to remain steady at 3.1% year-on-year — a key figure that could influence future Federal Reserve policy decisions.
