China can weaken the dollar and push up interest rates

Published or Updated: May 25, 2019

Higher interest rates would affect consumer and business spending, causing recession.

US dollar downward trend

Dollar dives as trade war hits US economy

The dollar fell on Friday from a two-year high against a basket of major currencies after orders for US-made capital goods fell, further evidence that manufacturing and the broader economy are slowing, due in part to the US-China trade dispute.

Some analysts initially believed that a trade war would be a boon for the US dollar - both because the currency serves as a safe haven in times of uncertainty and because the US was likely to be hurt the least, but that has not proven to be true.

Are we at risk of a Chinese dollar dump?

The Chinese can sell dollars in foreign exchange markets, raising U.S. interest rates and perhaps triggering a serious American recession that might spread elsewhere.