Market Volatility Driven by U.S. Trade Policy

Recent fluctuations in the foreign exchange market are largely attributed to the strength of the U.S. dollar, which has been influenced by evolving U.S. trade policies under the current administration. Expectations around potential tariffs, particularly on China, Canada, and Mexico, have created a climate of uncertainty that affects currency values. Notably, this uncertainty may lead the People's Bank of China (PBOC) to allow the yuan to depreciate if tariffs are enacted, while simultaneously pursuing domestic pro-growth policies to mitigate potential economic impact. The interplay between U.S. tariffs and China's monetary policy reflects a dynamic that is likely to keep the dollar high against other currencies for the foreseeable future.