US Dollar Index Reaches 2-week Lows

The dollar traded at two-week lows against a basket of other major currencies on Wednesday, with concerns over the US-China trade dispute easing up. Investors await the release of US inflation data and Federal Reserve’s meeting minutes last March.

The US dollar index, which gauges the greenback’s strength against a basket of six other major currencies, declined 0.15 percent to 89.20.

Chinese President Xi Jinping and US President Donald Trump both turned soft and made reconciliatory remarks on trade. This brought hopes to investors that a peaceful negotiation could avert a full-blown trade war between the world’s two biggest economies.

However, investors remained careful after a report said that the talks had already come to no positive results. In addition, geopolitical tensions have begun brewing in Syria, as the US and Russia entered into a confrontation over the possibility of a US strike in Syria.

The US has been discussing with its western allies about a possible military strike on Syria as a response to an alleged chemical attack over the weekend. Russia has been discouraging the US from engaging in any military action in Syria, with escalating tensions between the two powers.

The dollar was also weaker against the yen, with the USD/JPY slumping 0.24 percent to 106.93. The yen serves as a safe haven for investors who want to avoid any negative impacts of economic uncertainty and geopolitical conflicts.

The euro was at two-week highs, with EUR/USD higher 0.18 percent to 1.2376. The common currency stayed buoyed after the European Central Bank policymaker Ewald Nowotny claimed on Tuesday that it was high time to “normalize” its monetary policy.

Meanwhile, the British pound pared back its early gains against the dollar. It was last at 1.4199. The pound came off its best levels of the day after a data was released, which was about an unforeseen fall in UK manufacturing output last month.

The Bank of England is said to be scrutinizing the data. The bank is set to raise interest rates next month.

All-out Clash between the US and Russia Unlikely – Analysts

Even as Russia warned of “grave repercussions” to any military action by the US military, analysts still that the conflict will not grow into something bigger.

The Russian defense ministry has previously stated that it will strike any US aircraft that would try to hit any area in Damascus, where there are also Russian officials located.

Meanwhile, Boris Dolgov, who is an analyst at the Russian Institute of Oriental Studies, said that the US was more likely to intervene via proxies. He also suggested that an attack would probably come from other opposition groups that are supported by the US. Examples of these are “Kurdish fighters or non-American special services.”

Alexey Malashenko, who is a specialist in the Syria conflict, said that the US and Russia are more likely to be merely barking at each other.

“Moscow understands that a strike (against US forces) will bring about a response and it is not certain that Russia will emerge victorious from such a conflict,” he said.

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