The US dollar rose on Tuesday, rebounding after last session’s losses as a result of a sell-off in technology stocks, driven by growing concerns about trade wars and their impact on global growth.

The dollar index, which tracks the greenback’s performance against a basket of six major currencies, increased 0.5% to 107.725, although it remained slightly lower for the week.

Growth Concerns Benefit the Dollar

The dollar strengthened on Tuesday, supported by renewed concerns over global growth after US President Donald Trump reaffirmed his push for universal tariffs.

These developments have intensified fears of escalating trade wars and their potential economic consequences, reinforcing the dollar’s appeal as a safe-haven asset.

According to the Financial Times, new Treasury Secretary Scott Bessent is advocating for a gradual increase in global tariffs, starting at 2.5% and potentially rising to 20%. Trump later stated that he is considering “much higher” tariffs and is specifically targeting products such as copper, steel, and semiconductors.

“These comments contradict the markets’ provisionally optimistic assumption that tariffs would be more of a case-by-case (as for Colombia) rather than a universal measure,” ING analysts said in a note.

“The fact that the Treasury is actively exposing these plans and not just hinting at them probably means that the additional risk premium gap now embedded in dollar crosses may be more difficult to close.”

On Monday, the dollar briefly weakened as a sell-off in technology stocks weighed on risk sentiment. Markets reacted to the implications of a free, open-source artificial intelligence model launched by Chinese startup DeepSeek, which heightened competitive pressures in the tech sector.

Meanwhile, the Federal Reserve is set to conclude its two-day monetary policy meeting on Wednesday, where it is expected to keep interest rates unchanged.

ECB Meeting Approaching

In Europe, the EUR/USD pair fell 0.6% to 1.0430, hit by dollar strength, despite an improvement in consumer confidence in France following gains in German business morale.

“The tariff threat may be perceived more seriously given the Treasury’s active planning, and that materially reduces the euro’s upside potential,” ING said.

The European Central Bank meets on Thursday and is expected to cut interest rates again, having already cut them a total of four times last year.

“Our view is that the shock in the stock markets and the resurgence of tariff risk are going to be much more relevant for the EUR/USD compared to the widely anticipated 25 basis point cut and the very likely reiteration of a moderate trend orientation,” ING added.

Meanwhile, GBP/USD dropped 0.5% to 1.2437, as the pound showed signs of weakness ahead of the upcoming Bank of England policy meeting in early February.

Yen on a Rollercoaster Ride

In Asia, USD/JPY climbed to 155.70, with Tokyo inflation data expected to be a key focus later in the week.

“USD/JPY has been on a rollercoaster since the start of the week. The initial reaction to the tech-driven sell-off in equities was a perfect recipe for a rebound in the JPY: risk aversion, falling USD rates,” they said at ING.

“However, the exploration below 154.0 did not last long, and the broader dollar rally, which accelerated when universal tariffs were once again at the center of attention, has pushed USD/JPY back into the 155.50-156.0 zone. This is again a signal of the perceived correlation between US protectionism and a more aggressive Federal Reserve, which has major repercussions on the JPY, which is sensitive to rates.

Meanwhile, USD/CNH traded 0.5% higher at 7.2837, reflecting continued pressure from US tariff threats. Chinese markets were closed for the Lunar New Year holiday.