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  • US Dollar gains momentum against majors after new announcement on tariffs, drops versus EM and commodity currencies.  
  • DXY having best day since July, still capped below 98.00.  

The US Dollar rose versus EUR, CHF, JPY and GBP following the announcement of a delay on planned tariffs on some Chinese products until December 15th. The report triggered a rally in Wall Street and also of commodity and emerging market currencies.  

US Bond yields moved off recent lows and Wall Street jumped to the upside, with the DOW JONES rebounding 500 points in a few minutes. The US Dollar Index climbed from 97.45 to 97.81 reaching the highest level since August 5. The upside was limited by the rally in AUD/USD and NZD/USD.  

The news of the delay of some US tariffs on certain Chinese goods is positive for risk sentiment, although the full details aren’t yet known. You can see this by the initial reaction in FX markets with higher beta, high yielding FX such as AUD in the G10 FX space outperforming USD (due to the “risk-on factor”) while the likes of EUR, CHF and JPY under-performing the dollar (mainly via “higher UST yield factor” – this is particularly the case for the euro). In terms of the latter, the front-end UST yields spiked on the news (helped by higher CPI as well), with the hawkish Fed re-pricing supporting the dollar against the low yielding FX segment“, said ING analysts.  

DXY Levels  

The index moved off highs and as of writing stands around 97.70. It is headed toward the highest daily close since August 2 which is a positive development but in order to clear the way to more gains it needs to break and hold on top of 97.80. A slide back toward 97.40 would signal the DXY is ready to extend the consolidation range between 97.70 and 97.30. A close below 97.30 should expose 97.00/05.