NEW YORK: The dollar advanced to a five-month high against a basket of currencies on Monday, as news of a truce between the United States and China on trade tariffs prompted investors to pare back short positions on the greenback.
Investors have been short the dollar since July of last year, but the dollar index has rallied nearly 7 percent since mid-February.
The dollar has been mainly bolstered by generally solid U.S. economic data that has backed the Federal Reserve´s monetary policy tightening stance this year.
The prospect of a resolution to the U.S.-China trade tensions has further added to the dollar´s shine. The world´s two largest economies have agreed to drop their tariff threats for now. U.S. Treasury Secretary Steven Mnuchin and President Donald Trump´s top economic adviser, Larry Kudlow, said on Sunday the agreement reached by Chinese and American negotiators on Saturday set up a framework for addressing trade imbalances in the future.
"In the absence of major economic releases, the headline on the easing of trade tensions with China has been positive for the dollar, although the dollar in general has been doing a little bit better," said Sireen Harajli, FX strategist at Mizuho Bank in New York.
