The Dollar struggled to recover on Tuesday after steep losses, as investors remained uncertain about any real progress in easing the US-China trade conflict.

Treasury Secretary Scott Bessent added to the ambiguity, saying in a Monday interview that the responsibility to begin de-escalation lay with China, the latest in a series of mixed messages surrounding the trade negotiations between the world’s two largest economies.

Although US President Donald Trump has claimed progress in trade talks and said he spoke with Chinese President Xi Jinping, Beijing has denied these claims, Reuters reports.

The ongoing confusion gave investors further incentive to dump the Dollar, leading to sharp losses against traditional safe-haven currencies like the Yen and Swiss Franc in the previous session.

On Tuesday, the greenback struggled to recover but managed a modest 0.48% rise against the Swiss Franc, trading at 0.8238, and gained 0.27% against the Yen, reaching 142.41.

Investor sentiment received a small boost from news that President Donald Trump's administration would take steps on Tuesday to ease the effects of his automotive tariffs.

“Given the conflicting signals, I think a deal is very unlikely in the near-term and China might be preparing for a protracted trade war,” according to Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA).

“Overall, the US tariff policy is very chaotic and markets definitely don't like that, but there is indeed some growing optimism that the worst of the trade war is over.”

Although there has been little concrete progress in US-China trade talks, both sides have appeared to soften their positions in recent days. The Trump administration signalled a willingness to lower tariffs, while China offered exemptions for certain US goods from its 125% duties.

Meanwhile, the Euro slipped 0.34% to $1.1383 but remained on course for its biggest monthly gain against the Dollar in over two years, as investors continue to pull away from US assets in favour of European alternatives.

Furthermore, Sterling held close to a three-year high at $1.3399, while the Dollar stabilised at 99.25 against a basket of major currencies after sliding 0.6% the previous day.

Despite the pause, the Dollar index, measuring the currency against six major peers, remained on track for a 4.7% monthly drop, its steepest decline since November 2022.