The U.S. dollar slumped further Friday, falling to an almost two-year low, on weakening confidence in the American economy as the trade war between the two largest economies in the world escalated, with China once more raising the tariffs on U.S. goods.

At 04:20 ET (08:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, dropped 1.2% to 99.430, falling below the 100 level for the first time since July 2023.

Dollar slumps to near two-year low

U.S. President Donald Trump's pausing of widespread tariffs for 90 days helped the dollar, and global equities, but this relief hasn't lasted long as it didn't include China.

Instead, he ratcheted up duties on Chinese imports to an effective 145% rate, further escalating tensions between the world's two largest economies.

China retaliated again Friday, announcing a new 125% tariff on U.S. imports - up from the 84% announced on Wednesday.

Longer-dated U.S. Treasurys are also selling off, putting 10-year yields on course for their biggest weekly jump since 2001 as investors deserted U.S. assets, including this supposed safe haven.

"We are witnessing a simultaneous collapse in the price of all U.S. assets including equities, the dollar versus alternative reserve FX and the bond market," said analysts at Deutsche Bank, in a note.

"The market has lost faith in U.S. assets, so that instead of closing the asset-liability mismatch by hoarding dollar liquidity it is actively selling down the U.S. assets themselves," Deutsche said.

Source: Investing.com