Dollar Begins Day Focusing on Meeting Between Trump and Xi Jinping

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The US dollar strengthened this week due to rising domestic inflation, increased demand for safe-haven assets, and higher yields on U.S. Treasuries, which anticipate interest rate hikes by the Federal Reserve.
The anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping in Beijing was a primary focus, with China expressing interest in increasing its purchases of American oil. Global markets closely watched this encounter and ongoing negotiations between the US and Iran, which could impact international oil transport.
The offshore yuan reached a three-year high prior to the Trump-Xi meeting, with analysts predicting that the onshore yuan will remain stable in the short term due to potential trade agreements between China and the U.S.
In Brazilian politics, a new survey reveals a technical tie between former President Luiz Inacio Lula da Silva and Senator Flavio Bolsonaro in a potential second round of the presidential elections. Lula currently leads with 42% of voting intentions, while Bolsonaro registers 41%.

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Dollar Strengthens Amidst Trump-Xi Summit and Global Tensions The U.S. dollar experienced a significant rally throughout the week, buoyed by rising domestic inflation and increased demand for safe-haven assets amid global tensions. On Wednesday, the dollar opened higher, trading at R4.9001, reflecting a 0.09 advance. This strength is attributed to higher yields on U.S. Treasuries, with investors anticipating interest rate hikes by the Federal Reserve this year. The anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping in Beijing was a primary focus on Wednesday. This summit, the first in over a decade, aimed to foster a strong, stable, and constructive strategic relationship between the world’s two largest economies. China reportedly expressed interest in increasing its purchases of American oil, potentially reducing its reliance on Middle Eastern crude. The summit discussions also included Iran. Prior to heading to China, President Trump mentioned plans for an extended conversation on the issue. Global markets closely watched the encounter, as well as ongoing negotiations between the United States and Iran, which could impact the Strait of Hormuz, a critical route for international oil transport.

Meanwhile, the offshore yuan reached a three-year high prior to the Trump-Xi meeting. Analysts at Barclays predict that the onshore yuan will remain stable in the short term. Traders have been actively supporting the currency in anticipation of potential trade agreements between the two economic powers. The British pound, meanwhile, was trading at 1.3527, indicating an approximate 0.8% drop for the week. Further contributing to the dollar’s strength were fresh inflation figures. U.S. producer prices saw their largest increase in four years in April, signaling rising costs. Additionally, the U.S. Senate approved Kevin Warsh as the new Federal Reserve Chair on Wednesday. In Brazil, President Luiz Inacio Lula da Silva signed a provisional measure eliminating federal taxes on international e-commerce purchases up to $50. This measure removes the “shirt tax,” a 20% levy introduced in 2024 to curb imports and protect national industries, particularly from Chinese competitors.

Potential Second Round Tightens Between Lula and Bolsonaro in Brazil’s Presidential Elections

On the political front, a new Quaest survey reveals a technical tie between Lula and Senator Flavio Bolsonaro in a potential second round of the upcoming presidential elections. Lula currently leads with 42% of voting intentions, while Bolsonaro registers 41%. In the previous survey released in April, Bolsonaro had held the lead, following a tie at 41% in March.