Dollar Falls as Trade Tensions Persist and Fed Signals Rate Cuts

“The dominant theme remains the U.S.-China trade conflict,” said Matt Weller, head of market research at StoneX. “Beijing appears to be increasing pressure ahead of the planned meeting between Presidents Xi and Trump. The question is whether this is just tactical or signals a real decoupling.”

The greenback fell 0.49% to 0.793 against the Swiss franc, extending its decline as investors sought safer assets amid geopolitical uncertainty. Meanwhile, the euro reached a one-week high, rising 0.36% to $1.1688, supported by political stabilization in France after Prime Minister Sebastien Lecornu survived two no-confidence votes.

Federal Reserve Governor Christopher Waller backed another rate cut at the upcoming policy meeting, citing mixed signals in the U.S. labor market. His colleague Stephen Miran echoed support for a more aggressive easing path in 2025, while the Fed’s Beige Book highlighted weakening consumer spending and increased layoffs.

The U.S. dollar index slipped 0.33% to 98.35, while Treasury yields hovered near multi-week lows, with the 10-year yield just above 4%. Analysts noted that ongoing government shutdown risks could further weigh on the greenback.

“Markets are essentially frozen between two fears: a prolonged U.S. shutdown and worsening trade tensions with China,” said Weller. “That combination is keeping traders cautious and the dollar under pressure.”

Elsewhere, the yen and Australian dollar both strengthened modestly, while China’s yuan firmed to a two-week high after the central bank set its strongest daily midpoint in a year.

In focus for Swiss franc traders, the USD/CHF pair continues to reflect global risk sentiment. If the Fed’s dovish stance persists and political instability grows in Europe, the traditionally safe-haven franc may hold its gains or even appreciate further against both the dollar and the euro in the coming weeks.