Global stock markets were largely range-bound on Tuesday, while the U.S. dollar rebounded slightly from recent losses against Asian currencies, as concerns about U.S. tariffs resurfaced, reigniting worries about their impact on economic growth. The uncertainty surrounding trade policies, particularly from U.S. President Donald Trump, added to market volatility, with investors looking for clues on the future direction of tariffs and their broader implications. These concerns were compounded by pledges from major oil producers to increase supply, keeping crude prices near four-year lows. Since April, the erratic trade policies have triggered significant dollar selling, as investors moved away from U.S. assets, resulting in a rise in the euro, yen, and Swiss franc.
This dollar selling trend extended to Asia, with the Taiwan dollar surging to record highs in recent sessions, leading to speculation that the region’s currencies could be revalued in exchange for U.S. trade concessions. This rally highlighted long-standing positions in the dollar held by exporters and insurers in the region, raising questions about the stability of those positions. In Hong Kong, the central bank intervened, purchasing $7.8 billion to prevent the local currency from breaking its peg to the U.S. dollar. Market watchers noted that the primary focus had shifted to Asian foreign exchange markets, as a sharp appreciation in these currencies could raise concerns of a “reverse Asian currency crisis,” potentially affecting the bond market and prompting Asian institutions to reassess their exposure to U.S. Treasury holdings.
In stock markets, the MSCI Asia-Pacific index excluding Japan saw a modest increase of 0.2%, with Japan’s market closed for a holiday. Chinese markets returned from a long break with their blue-chip index rising nearly 1%, and Hong Kong’s Hang Seng index gaining 0.69%. U.S. stock futures slipped slightly as investors continued to weigh the impact of tariff-related headlines. Hopes for easing trade tensions between the U.S. and China had kept sentiment cautiously optimistic, with Beijing considering U.S. offers for talks.
As attention shifted to the Federal Reserve’s policy decision on Wednesday, most market participants expected the central bank to hold rates steady, with particular focus on how it will manage the challenges posed by ongoing trade disputes. The Fed’s stance is likely to be more hawkish, favoring an extended pause rather than immediate rate hikes, as traders anticipate some easing later this year. Meanwhile, oil prices steadied after reaching lows, driven by OPEC+ decisions to boost production, and gold prices rose amid increased demand for safe-haven assets.
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