The dollar index traded within a narrow range on Thursday, as investors balanced escalating US-China trade tensions, prolonged domestic political uncertainty, and anticipation of fresh guidance from Federal Reserve officials.
The US government shutdown continued, delaying critical data releases and complicating the Fed’s ability to assess real-time economic conditions.
Trade tensions remained at the forefront after President Donald Trump said the United States is “already in” a trade war with China, while Treasury Secretary Scott Bessent hinted at the possibility of extending the existing rare-earth truce beyond three months.
Investors are also bracing for a potential Trump-Xi meeting later this month in South Korea, though hopes for a breakthrough remain slim amid tit-for-tat sanctions and tariff threats, adding a layer of uncertainty for the dollar’s short-term direction.
Meanwhile, the Fed’s latest Beige Book reported stagnant economic activity, modest wage growth, and muted hiring across most districts, echoing Chair Jerome Powell’s recent warnings of a weakening labour market. Markets continue to expect a quarter-point rate cut this month and another in December. The 10-year Treasury yield remained slightly above 4%, with markets exercising caution ahead of multiple speeches that could influence the outlook for near-term policy. Dovish posture could drag yields and the dollar down, while a cautious tone may lend temporary support to both.
