Dollar rally unravels as investors shrug off Trump U-turns

NEW YORK – The dollar staged a broad retreat on Thursday, as investor gloom over the lack of progress toward defusing the US-China trade war reasserted itself following an interlude of optimism the previous day.

US assets, including the dollar, rallied on Wednesday after US President Donald Trump backed down from threats to fire Federal Reserve Chair Jerome Powell and appeared to soften his stance on China.

Treasury Secretary Scott Bessent said separately that the de facto embargo on US-China trade was unsustainable, but that the US would not move first in lowering its levies of more than 100% on Chinese goods.

By Thursday, those dollar gains had unraveled. China said no negotiations had been held on the economy and trade and it urged the US to lift all unilateral tariff measures if it really wished to resolve the issue, leaving investors roughly where they were earlier in the week in terms of clarity.

However, Trump maintained on Thursday that trade talks with China are underway. “They had a meeting this morning,” he told reporters, declining to say to whom he was referring.

“It seems like there’s a gulf as wide as the Pacific Ocean between how the US and China are viewing trade,” said Matt Weller, head of market research at StoneX. “And I think as long as that gulf remains, the rallies in the dollar might be short-lived.”

The yen led the charge higher, leaving the dollar down 0.54% on the day at 142.700, but still above the 140-mark breached last week.

The dollar has been the biggest casualty of Trump’s on-off tariffs, dropping 4.8% so far in April, which would mark its largest monthly decline since November 2022.

Investors had been shaken over the last few days when Trump made a series of verbal attacks on Powell over his reluctance to cut interest rates until justified by economic data.

Such has been the investor pullback from the dollar that it is on course for its worst start to the year against a basket of currencies since the 1970s, according to LSEG data.

“There were hopes of a thaw in the US-driven trade dispute with absolutely everyone,” said Trade Nation strategist David Morrison.

“(Trump) softened his tone towards China, calling on them to come and negotiate. But it turns out it takes two to tango, and for now, the Chinese leadership has decided to let the Trump administration stew in its own mess,” he added.

The Swiss franc, which is around its strongest against the dollar in more than a decade as a result of hefty safe-haven flows this month, rose, leaving the US currency down 0.33% on the day at 0.82795 francs.

The pound rose 0.55% to USD 1.3325. UK finance minister Rachel Reeves said on Thursday she was confident Britain could reach a trade deal with the United States.

Bitcoin tracked the dollar lower, falling 0.23% on the day to USD 93,469. Meanwhile, Trump’s meme coin surged 33% overnight after the online promotion of a gala dinner with the president for the top 220 buyers of the USD TRUMP coin. It is still only worth roughly a quarter of what it was at its launch in January.

(Reporting by Hannah Lang in New York and Amanda Cooper in London; additional reporting by Tom Westbrook; Editing Jamie Freed, Kate Mayberry, Kirsten Donovan, Barbara Lewis and Richard Chang)