The Dollar Gains As China Speaks Tough On Taiwan

 

On Tuesday, amid mounting diplomatic tensions in the wake of the planned visit to Taiwan by US House Speaker Nancy Pelosi, haven flows are said to provide some support for the US dollar. According to Win Thin, Global Head of Currency Strategy at BBH, the US dollar draws some support from haven flows. Ahead of Fed speakers and essential US economic data this week, he maintains his optimistic perspective for the USD over the medium run.

As a risk aversion mentality takes hold of the market, the dollar gains some modest momentum. As a result of House Speaker Pelosi’s trip to Taiwan, which has heightened tensions with China, the DXY index is now trading at 105.541, marking its first gain after four consecutive days in the red. We are sticking with our recommendation for a strong dollar and continue to think that the market is misinterpreting the Fed’s commitment to reducing inflation. However, without robust economic data, it is doubtful that the greenback’s value would gain any momentum. The prognosis for the dollar in the medium term will be heavily influenced by the statistics from the United States this week.

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