Safe-haven dollar gallops on DeepSeek concerns

The EURUSD major currency pair tumbled to near 1.0420 in Tuesday’s North American session as the US dollar strengthens amid a global sell-off in technology, power and data centre stocks, which has increased its safe-haven appeal.

The DXY Dollar Index, which tracks the greenback’s value against six major currencies, surged to near 108.00.

Investors are dumping technology stocks as China’s DeepSeek low-cost artificial intelligence model has challenged the dominance of current AI players and their related entities around the world.

Meanwhile, deepening uncertainty over President Trump’s universal tariff plan and the Federal Reserve’s monetary policy announcement on Wednesday has also strengthened the US dollar.

Soon after being selected as US Treasury Secretary, Scott Bessent proposed the plan of imposing a universal 2.5% tariff plan, which will increase gradually each month until reaching Trump’s guidance of 20%.

Market experts believe that the gradual introduction of tariffs will give more time for the US to negotiate harder and close better deals with their trading partners.

On the monetary policy front, the Fed is almost certain to leave interest rates unchanged in the 4.25-4.50% range. Therefore, investors will mainly focus on Fed Chair Jerome Powell’s press conference after the policy decision for fresh interest rate guidance.

Analysts at Macquarie expect that Powell is unlikely to offer much in this regard other than emphasising the “data dependence of future decisions” while highlighting “uncertainty about the neutral rate”.