- A JPMorgan emerging market currency index fell to its lowest since May 2017. The Turkish lira and the Mexican peso slipped against the dollar.
- The dollar index, which measures the greenback against a basket of six currencies, was up 0.31 percent at 95.45. It rose as high as 95.625, its highest since Aug. 24, earlier in the session.
The dollar rose broadly on Tuesday as concerns about a possible escalation in trade conflict between the United States and China boosted safe-haven demand for the greenback and as investors dumped emerging market currencies.
The dollar index, which measures the greenback against a basket of six currencies, was up 0.31 percent at 95.45. It rose as high as 95.625, its highest since Aug. 24, earlier in the session.
"By the middle of last week we were looking at renewed trade tensions and we were looking at economic data supporting ideas of a Fed rate hike," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
"Where we are now is that the underlying dollar up-trend is resuming," he said.
The public comment period on a U.S. proposal for new tariffs on Chinese goods is set to end on Thursday, after which U.S. President Donald Trump can follow through on plans to impose tariffs on $200 billion more of Chinese imports, though it is unclear how quickly that will happen.
Chinese state-owned banks have swapped dollars for yuan in tenors ranging from a month to a year in the offshore forwards market in recent days, traders said on Tuesday, providing some support for the yuan as markets braced for a potential major escalation in the U.S.-China tariff war.
Meanwhile, U.S.-Canada trade talks ended on Friday with no deal to revamp the North American Free Trade Agreement after the mood soured, and President Donald Trump notified Congress of his intent to sign a bilateral trade pact with Mexico.
The weakened to a six-week low against its U.S. counterpart amid an uncertain outlook for Canada's trading arrangement with the United States.
"My sense would be Trump is focused on Mexico, but he is not in any mood to compromise on Canada, Europe or China," said Chandler.
Emerging market currencies came in for special punishment as investors feared these export-oriented economies would be caught in the middle of any escalating trade conflict.
A JPMorgan emerging market currency index fell to its lowest since May 2017. The Turkish lira and the Mexican peso slipped against the dollar.
Major currencies were also caught in the widening sell-off in emerging markets, with the euro down 0.41 percent. The greenback gained 0.36 percent against the Japanese .
The pound sank to a one-week low on Tuesday on rising doubt among investors about the progress of Brexit talks and the future leadership of the Bank of England.