Key Takeaways:

* The Dollar Index remained firm near 100.20, supported mainly by expectations for further Federal Reserve tightening.

* US and Chinese officials held constructive talks on trade, investment and artificial intelligence ahead of this week’s Trump–Xi summit.

* The two sides agreed to establish a formal dialogue on AI safety and emergency communication.

* Gold retreated as the firmer dollar and improving global risk sentiment reduced safe-haven demand.

* Lower oil prices and Treasury yields may limit further dollar upside, but the Fed’s hawkish outlook continues to provide support.

Market Summary:

The US Dollar extended its gains as investors continued to digest the Federal Reserve’s hawkish policy outlook while monitoring improving developments between the United States and China.

US and Chinese officials concluded high-level discussions in New York ahead of President Xi Jinping’s visit to the United States from September 23–25. The talks covered trade, investment and artificial intelligence, with US Treasury Secretary Scott Bessent describing the discussions positively. Both sides also agreed to establish a formal dialogue focused on AI risks and emergency communication.

However, the positive US–China developments should be viewed mainly as a risk-sentiment catalyst rather than a direct bullish driver for the dollar. The greenback’s main support continues to come from expectations that US interest rates may remain elevated or rise further following the Fed’s recent rate hike. The Dollar Index remained around 100.20, close to its recent seven-week highs.

Lower crude oil prices and easing Treasury yields have reduced some of the inflation pressure that previously supported the dollar, but the Fed’s continued focus on controlling inflation has kept the downside relatively limited.

Gold, meanwhile, moved lower as the firmer dollar and improving risk sentiment reduced demand for safe-haven assets. Constructive US–China discussions and stronger global equity markets encouraged investors to rotate toward risk assets, while expectations for a higher-for-longer US interest-rate environment remained another headwind for non-yielding bullion.

For now, the dollar remains fundamentally supported by Fed tightening expectations, while gold could remain under pressure if risk sentiment continues to improve. However, any renewed decline in Treasury yields or deterioration in geopolitical and trade developments could provide support for bullion.