The U.S. dollar was choppy on Tuesday, as investors attempted to gauge the longevity of a flare-up in trade tensions between the U.S. and China.

U.S. President Donald Trump has appeared to rein in his strident rhetoric about China in recent days, after previously saying he would slap triple-digit tariffs on the country following Beijing's move to expand its restrictions on exports of critical rare earth materials.

Despite signs of the White House assuming a more conciliatory stance, some concerns have continued to swirl around the intractable nature of the trade spat between the world's two largest economies. China has announced sanctions on five U.S.-connected subsidiaries of South Korean shipbuilder Hanwha Ocean, and Beijing and Washington will impose additional port fees on ocean shipping groups that transport everything from children's toys to crude oil.

By 04:45 ET, the U.S. dollar index, which tracks the greenback against a basket of currency peers, had inched up by 0.1% to 99.36. It had broadly pulled back in earlier trading.

"China has ramped up retaliation against the U.S. trade investigation, and markets are again jittery about the prospects of a fully-fledged re-escalation. There are downside risks for the dollar, but mostly against other low-yielders, as markets prefer to dump higher-beta currencies for now," analysts at ING said in a note.

The analysts added that, given a lack of fresh U.S. economic data during an ongoing federal government shutdown, they will be watching a metric of small business optimism from the National Federal of Independent Business due out on Tuesday. Federal Reserve Chair Jerome Powell is also scheduled to deliver remarks at an event later today.

Elsewhere, traders were monitoring ongoing political upheaval in France. Two no-confidence motions from parties on both the extreme left and right facing Prime Minister Sebastien Lecornu are threatening to potentially bring down the latest French government by the end of the week.

Speaking on Monday, French President Emmanuel Macron rejected calls for him to resign, even as his rivals have suggested that the only way to resolve one of France's greatest political crises in decades is for him to depart.

"Unless major USD-negative news comes from the U.S. (macro or tariffs), we doubt the euro will stage any idiosyncratic rebound before getting any clarity on French politics," the ING analysts said.

Source: Investing.com