Dollar Higher Before Fed, Stocks Struggle on Trade Concerns

The U.S. dollar was higher on Tuesday, as traders looked for hints from the U.S. Federal Reserve which analysts expect to raise interest rates later this week. The Fed’s two-day policy meeting begins later on Tuesday, and if it raises interest rates, it will be the eighth time since 2015 that the central bank has made such a move. Analysts also expect one more rate hike before the end of 2018.

The dollar index was up 0.16 percent as of 12:34 p.m. HK/SIN, as the greenback gained against all of its primary trading partners. The dollar was up 0.06 percent against the yen, to trade at 112.86. It also gained 0.06 percent against the Canadian dollar, trading at 1.2957. The pound slid 0.11 percent against the dollar to trade at $1.3103, and the Australian dollar and the euro were also lower just after noon in Asia.

Trade War Keeps Traders Anxious

The dollar’s strengthening is a direct result of traders who expect that the U.S. has less to lose than China if the trade war escalates further. Both countries implemented new tariffs on Monday, and neither showed any sign of willingness to ease the dispute in the near future, even though Beijing did say that it would be willing to resume negotiations if there is “mutual respect and equality” between the countries.

Gold, typically a safe-haven asset in times of political discord, has not seen a recent spike despite the trade war, but it has remained relatively stable. The precious metal was trading at $1,203 per ounce on Tuesday, down 0.12 percent.

Stock markets also reflected a new wave of trader anxiety, with Hong Kong Hang Seng Index plummeting 1.62 percent near midday on Tuesday, and the Shanghai composite trading down 0.76 percent. Japan’s Nikkei 225 managed to trade higher, gaining 0.11 percent.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.