Dollar Struggles Amid Economic Uncertainty as Yuan Rises on China’s Stimulus Boost
Easy Trading Tips – The U.S. dollar hovered near a five-month low against major currencies on Monday, weighed down by ongoing economic concerns, unpredictable trade policies from the Trump administration, and a string of weak economic data.
Meanwhile, the euro remained close to a five-month high following a major fiscal agreement in Germany that could increase defense spending and stimulate growth in Europe’s largest economy.
According to Goldman Sachs analysts Dominic Wilson and Kamakshya Trivedi, two major shifts have shaped macroeconomic trends in recent weeks.
First, U.S. assets have seen a sharp decline in valuation due to trade-related volatility and broader policy uncertainty under the current administration. Second, Germany’s fiscal outlook has significantly improved, strengthening confidence in the euro.
“These shifts challenge the long-standing narrative of U.S. economic superiority,” the analysts stated in a client note.
The euro was trading at $1.0879, slightly below last Tuesday’s five-month peak of $1.0947.
Germany is also making waves in the financial world, with incoming Chancellor Friedrich Merz securing key backing from the Greens for an ambitious borrowing plan. The proposal, expected to pass this week, includes a €500 billion ($544 billion) infrastructure fund and sweeping changes to borrowing regulations.
Chinese Yuan Gains as Beijing Rolls Out Economic Stimulus
The Chinese yuan edged closer to a four-month high in offshore trading, reaching 7.2400 per dollar. Last week, it strengthened to 7.2158 per dollar, marking its strongest level since mid-November.
On Sunday, China’s State Council introduced a “special action plan” aimed at boosting domestic consumption. The plan includes income-boosting measures and childcare subsidies to support household spending.
Recent Chinese economic data has also shown signs of improvement, with retail sales gaining momentum in the first two months of the year.
U.S. Dollar Faces Pressure as Market Eyes Economic Indicators
The U.S. dollar index, which measures the greenback’s strength against six major currencies, held steady at 103.71 during early Asian trading, remaining close to last Tuesday’s five-month low of 103.21.
The index has fallen nearly 6% from its mid-January peak of 110.17 as initial optimism about Trump’s economic policies fades into concerns over potential recession risks triggered by aggressive trade tariffs.
Friday’s data revealed a sharp drop in U.S. consumer sentiment, reaching its lowest level in over two years, while inflation expectations surged amid fears of an escalating global trade war.
Investors are closely watching U.S. retail sales data, set for release later in the day, as a key test for the dollar’s resilience. “Given the sharp decline in consumer confidence, this report will be crucial for the USD’s short-term trajectory,” HSBC strategists noted.
Yen and Sterling Hold Steady Ahead of Central Bank Meetings
Against the Japanese yen, the dollar remained stable at 148.70, near last Tuesday’s low of 146.545—the weakest level since October.
The Federal Reserve is widely expected to keep interest rates unchanged in its policy meeting on Wednesday. Meanwhile, the Bank of Japan is also projected to hold rates steady, though expectations for future hikes are growing as major Japanese firms continue offering strong wage increases for a third consecutive year.
Speaking in parliament last week, BOJ Governor Kazuo Ueda expressed optimism about rising wages boosting domestic consumption but acknowledged concerns over global economic uncertainties.
The dollar edged up slightly to 148.83 yen.
Elsewhere, the British pound remained stable at $1.2927, with the Bank of England expected to maintain its current policy stance during its upcoming meeting on Thursday.