U.S. Dollar Hits Two-Week High as Trump Threatens Higher China Tariffs

The U.S. dollar notched two-week highs on Tuesday after President Donald Trump warned of higher import duties on Chinese products ahead of a key trade summit later this week.

Dollar Gains, Gold Falls

The U.S. dollar index (DXY) rose 0.3% to 97.38, its highest level since Nov. 12. DXY is also 0.3% shy of its yearly peak.

Gains in the dollar were seen across all major currency peers. The euro fell 0.4% to 1.1291 U.S. The Brexit-inspired British pound fell half a percent to 1.2748 U.S. The greenback added 0.3% against its northern rival, the Canadian dollar, to trade at 1.3287 CAD.

A stronger dollar makes investing in gold costlier for holders of other currencies. February gold futures fell $9.80, or 0.8% to $1,218.90 a troy ounce on the Comex division of the New York Mercantile Exchange. Despite having a lackluster month, bullion has managed to hold above the all important $1,200 support. Still, the yellow metal is still roughly 13% lower than its 52-week high.

Spot gold traded down $9.25, or 0.8%, at $1,1213.15 a troy ounce.

Silver, another metal that trades inversely with the dollar, slipped 12 cents, or 0.8%, to $14.23 a troy ounce.

Trump-Xi Meeting Nears

President Trump has warned China that higher import duties are still on the table if both sides are unable to make progress later trade talks later this week. On Monday, the U.S. president said he was “highly unlikely” to accept Beijing’s request to hold off on raising duties, which are scheduled to come into effect Jan. 1.

The Trump administration is looking to raise tariffs to 25% on more than $200 billion worth of Chinese goods. A third and final round of tariffs targeting a remaining $267 billion in Chinese goods is likely if both sides fail to break the impasse.

In an interview with The Wall Street Journal, the U.S. president said he may also expand the tariff war to target Apple products imported from China. The news sent Apple’s stock tumbling in after-hours trading on Monday.

Trump and Chinese President Xi Jinping will meet later this week on the sidelines of the Group of 20 summit in Buenos Aires, Argentina. Although markets have high hopes for the meeting, U.S. Commerce Secretary Wilbur Ross say an all-encompassing trade deal is unlikely by the new year. At best, the negotiations would result in a common “framework” that could be pursued later as part of a more comprehensive negotiating round.

Featured image courtesy of Shutterstock.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi