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China’s offshore yuan and the Australian dollar found their footing again on Tuesday as broader sentiment stabilized after U.S. President Donald Trumpsaid he expected Sino-U.S. trade negotiations to be successful.

Trump said earlier he would meet with Chinese President Xi Jinping at a G20 summit next month. China had announced on Monday it would impose higher tariffs on $60 billion of U.S. goods following Washington’s decision last week to hike its own levies on $200 billion in Chinese imports.

Though analysts said it would take time for volatility to settle completely, risk-sensitive currencies including the offshore yuan and the Aussie held up well following comments from Trump late on Monday that trade talks with China are “going to be very successful.”

Masafumi Yamamoto, chief currency strategist at Mizuho Securities, said the timing of Beijing’s announcement that it would impose higher tariffs on U.S. goods had exacerbated moves in the foreign exchange market during the previous session.

“It seems the timing was probably a surprise so the moves in the currency market were rather large,” Yamamoto said, adding that market participants could also be over-reacting to Trump’s latest trade-related comments.

“Trump said he believes that (the trade talks) will be successful, but success for him isn’t necessarily a success for China,” Yamamoto said.

China’s offshore yuan last gained about a quarter of a percent at 6.8948 per dollar.

The yuan had suffered its steepest one-day decline since late July last year during the previous session, before hitting its lowest versus the greenback since late December early on Tuesday.

The Australian dollar managed to firm a tenth of a percent to $0.6952 after brushing its lowest since early January earlier in the session.

The Aussie is often seen as a proxy for Chinese growth because of Australia’s export-reliant economy and China being the country’s main destination for its commodities.

“Volatility in the market has risen quite a lot. I think it will take time before it will settle,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

Ishizuki said he thought it was unlikely that sentiment would deteriorate significantly from here ahead of Trump’s planned meeting with Xi next month.

“Quite a lot of negative news has come out. But with things as they are, those have already been priced in by the market,” he added.

The dollar index against a basket of six rivals held steady at 97.320, having ended the previous session little changed.

Investor focus on Tuesday was also on eurozone industrial production for March and Germany’s ZEW economic sentiment index for May, both due around 0900 GMT.

The euro rose 0.15% to $1.1238. Sterling was a shade higher at $1.2968.

Against the safe-haven yen, the dollar gained a quarter of a percent to 109.60, bouncing in line with the recovery in sentiment after falling as low as 109.15 yen in early trade.

The greenback had touched a more than three-month low of 109.02 yen brushed during the previous session when it shed nearly 0.6%.

Bitcoin, the world’s best-known cryptocurrency, on Monday hit $8,000 on the Bitstamp exchange for the first time since July last year, before retreating slightly. It was last up 1.9% on the day at $7,965.98

China’s yuan was set for its worst daily fall in nine months on Monday as trade negotiations between the U.S. and China ended after President Donald Trumpraised tariffs on Chinese goods.

Currency moves in response to the latest trade hostilities have been muted, but on Monday the yuan fell 0.8% to 6.9040, its weakest since Dec. 27.

Some analysts say it may breach 7 per dollar in coming months, a level last seen during the global financial crisis.

China would probably use its vast currency reserves to stop any plunge through 7 to the dollar, which could trigger speculation and heavy capital outflows.

Investors bid up the yen, which is considered a safe haven in times of stress given Japan’s status as the world’s largest creditor and its huge hoard of assets abroad.

The yen was 0.25% higher at 109.700 yen, near last week’s three-month high of 109.470.

“We’re waiting to see if China retaliates to the latest round of U.S. tariffs … and continue to favor the yen on a short-term basis and expect the market to remain focused on the yuan,” said Chris Turner, an ING currency strategist.

The world’s two biggest economies appeared deadlocked on Sunday. Washington demands changes to Chinese law; Beijing says it won’t swallow any “bitter fruit” that harms its interests.

President Trump and his Chinese counterpart Xi Jinping are likely to meet during a G-20 summit in Japan at the end of June and discuss trade.

The Australian dollar shed 0.3% to $0.6976. A drop below $0.6960 would take the currency, already burdened by a dovish shift by the Reserve Bank of Australia, to its lowest since early January.

The Aussie is sensitive to shifts in risk sentiment and also serves as a proxy for trades related to China, Australia’s largest trading partner.

The dollar index against a basket of six major currencies was flat at 97.318.

The euro edged higher on Friday and is poised for a second consecutive week of gains on growing fears that any escalation in the trade conflict between the United States and China would force U.S. policymakers to cut interest rates.

U.S. President Donald Trump’s tariff increase to 25% from 10% on $200 billion of Chinese goods kicked in on Friday, and Beijing said it would strike back. The two sides are pursuing last-ditch talks to try to salvage a trade deal.

While U.S. and Chinese officials return to the negotiating table later on Friday, investors have quietly ratcheted up bets of a U.S. interest rate cut with markets now roughly expecting one rate hike by the end of 2019.

Athanasios Vamvakidis, an FX strategist at Bank of America Merrill Lynch, said if China retaliated then the threat of a global trade war will affect the outlook of the U.S. economy and increase the chances of a Fed rate cut.

“In this case, the Fed has more room to ease than most other central banks, suggesting eventually a weaker dollar against both the euro and the yen,” he said.

The single currency edged 0.1% higher to $1.1220 on Friday and was on track for a second consecutive week of gains.

Broadly, risk appetite was muted though some of the higher-yielding currencies such as the Australian dollar which was heavily sold earlier this week when Trump unexpectedly ratcheted up trade tensions, gained.

The dollar index measuring the U.S. currency against a basket of six major currencies, of which the euro is a main component, was slightly firmer at 97.43.

Still, trade tensions have had broadly little impact on foreign exchange markets with typical perceived safe-haven assets such as the Japanese yen only gaining 1.2% this week while broader currency market volatility gauges were subdued despite a minor bounce this week.

Elsewhere, the pound held around the $1.30 level after sustaining some losses this week before first quarter British GDP data where expectations are for a 0.5% expansion compared with 0.3% growth in the previous quarter.

The Japanese yen surged to a 3-month high against the dollar on Thursday as investors piled into the safe-haven currency fearing that the U.S.-China trade conflict could escalate.

Two days of trade talks begin in Washington on Thursday and traders are waiting to see whether Chinese and U.S. negotiators can salvage a deal to prevent more U.S. tariff increases.

Currency moves this week in response to a new bout of trade war angst have been fairly muted but Thursday’s jump in the yen – which tends to attract demand in times of political strife and market turmoil – suggested investor nerves are fraying.

The main casualties of the heightened tensions have been the Australian dollar, a proxy for Chinese economic prospects, the U.S. dollar and the offshore Chinese yuan.

The yuan on Thursday fell half a percent to hit a four-month low of 6.838 and was headed for its worst four-day decline in a year.

“It looks very much like a trade deal is almost off the table and that the U.S. will impose new tariffs on Chinese goods tomorrow. Fears in the market are mostly reflected in yuan exchange rates,” said Ulrich Leuchtmann, an FX strategist at Commerzbank.

Unlike previous episodes when the dollar benefited from an increase in trade worries, U.S. President Donald Trump’s latest threat to raise tariffs on Chinese imports have prompted market strategists to focus on the corrosive impact on Washington.

The prospects of an escalation in the conflict has seen the yen gain in recent days.

The currency rose 0.3 percent against the dollar at 109.640 yen, a 3-month high, taking its gains to more than 1 percent so far this month. According to the latest Commodity Futures Trading Commission data, speculators have further raised their net long dollar bets, including those against the yen.

Trump said on Wednesday that China “broke the deal” reached in talks with the United States, and vowed to not back down on imposing new tariffs unless Beijing “stops cheating our workers”.

Shin Kadota, senior strategist at Barclays in Tokyo, said the yen “owes much of its strength to gains made in the cross currency market. ‘Risk on, risk off’ has been the main market driver and the euro has been stuck in range as a result.”

The Japanese yen rallied to a six-week high against the dollar on Wednesday as growing concerns about the trade dispute between China and the United States prompted investors to take shelter in perceived safe-haven assets.

Data out earlier showed China’s trade surplus with the United States, a major irritant for Washington, expanded to $21.01 billion in April from a month ago, a factor that might provoke a hardening stance from U.S. officials.

“The threat of further escalation in the tariff war becomes real again and at the moment, it is just impossible to assign any probability to any scenario, positive or negative,” Societe Generale strategists said in a daily note.

Focus is on trade talks on Thursday and Friday in Washington, where Chinese Vice Premier Liu will try to salvage a deal that would avoid a sharp increase in tariffs on Chinese goods scheduled to take effect on Friday.

The prospects of an escalation rather than a resolution of the spat between the U.S. and China has seen the yen gain in recent days, with the currency up 0.22 percent against the dollar at 110.0 yen, taking its gains to more than 1 percent so far this month.

The New Zealand dollar was the other notable loser overnight after the central bank cut benchmark cash rates to 1.5 percent from 1.75 percent.

The kiwi was last off 0.1 percent, recovering somewhat after falling to $0.6525 in the immediate aftermath of the rate cut, its lowest since last November.

Elsewhere, the euro was up 0.13 percent at $1.1204, but holding within recent ranges as currency traders were still undecided on the inflationary outlook for the euro zone economy and the latest developments on the trade war front.

“The European Central Bank is likely to keep a close eye on the renewed escalation of the trade war as the real economic consequences could be considerable, affecting its monetary policy,” Commerzbank strategists said.

The pound fell for a third day, edging down 0.43 percent to $1.3018.

The Japanese yen rallied to a three-week high on Tuesday as disappointing data on Chinese manufacturing undermined risk appetite, with investors waiting for European data to see if that will push currencies out of recent trading ranges.

Forecasts are for a 0.3 percent rise in euro zone gross domestic product from the quarter before. That would be a bigger increase than the previous quarter and may be taken as a sign of stabilization.

Even such marginal growth could squeeze speculators who have been amassing large short positions in the euro, worth a net $14.8 billion in the week to April 23.

“Any signs of consolidation in the German CPI data and the eurozone GDP figures may lead to some unwinding of the extended short positions in the euro, particularly on the crosses,” said Valentin Marinov, head of G10 FX research at Credit Agricole in London.

But early trends in the currency markets were cautious after China’s official purchasing management index dipped to 50.1 April. Forecasts had been for no change from March’s 50.5 or an increase.

Some of the favored currencies in a low-volatility environment such as the Australian dollar and the Aussie/Swiss franc fell 0.2 to 0.3 percent.

Trading was thin with Japan on holiday, and set to get thinner on Wednesday when China and much of Europe will be off.

Against a basket of currencies, the dollar was flat at 97.839. On a monthly basis, it was up 0.6 percent and on track for a third consecutive month of gains.

The Federal Reserve’s two-day policy meeting, which ends on Wednesday, remains a hurdle for the dollar. No change in policy is expected, but the market wants to hear how Chairman Jerome Powell resolves the divergence between solid economic growth and slowing inflation.

A rally in the dollar faltered on Monday with strong U.S. data doing little to lift the currency or convince investors that a slowdown in activity is over.

The greenback traded in a narrow range as Japan kicked off a week of holidays, typically a period of thin liquidity that can prompt spikes in volatility.

A Federal Reserve policy meeting, Brexit negotiations and a raft of global data including on U.S. core inflation and payrolls could each be the trigger for big currency swings this week.

All eyes are on the Fed to see what its policymakers made of a first-quarter gross domestic product report that showed strong growth of 3.2 percent, but largely for one-off reasons including a surge in inventories.

“This is not the week during which we would be looking to put on large positions in FX in an attempt to profit from the market implications of one or more economic events,” said Stephen Gallo, European head of FX strategy at BMO Capital Markets in London.

“Nevertheless, our overwhelming bias with high conviction remains buying the USD on dips vs most of the rest of the G10 space.”

The aggregate dollar long position climbed to $33.6 billion on Monday, its highest level since December 2015, according to Scotiabank’s weekly CFTC sentiment report. The euro remains the largest held net short.

Against a basket of currencies, the dollar was a fraction softer at 97.970, having eased from a near two-year peak of 98.330.

The dollar fell back on Friday despite the upbeat GDP report because core inflation slowed sharply, leading speculators to narrow the odds on a rate cut this year.

Most other major central banks have also turned dovish in recent months, keeping their currencies subdued.

The Canadian dollar and Swedish crown, for instance, both took hits last week when their central banks put a halt on future rate hikes.

The European Central Bank is under pressure to keep its stimulus in place, if not to do a new round, while markets are pricing in rate cuts for Australia and New Zealand following weak inflation readings.

Some fear the lack of liquidity could lead to a re-run of the dollar’s flash crash from January when the yen made massive gains in a matter of minutes as bears were forced to cover short positions.

The euro was a shade firmer at $1.1157, but still not far from a near two-year trough of $1.1110. The euro has been broadly pushing lower since early January.

A swathe of manufacturing surveys from Europe and China are due later this week, along with a first reading on EU GDP. The U.S. payrolls report on Friday is forecast to show a solid increase of 180,000 in April, with unemployment at 3.8 percent.

The euro hovered near 22-month lows on Friday as traders waited to see whether U.S. GDP data due out later will reinforce signs of economic strength and send the dollar surging even higher.

After a small rise in volatility this week – albeit from multi-year lows – currency markets were quiet at the European open, with most major pairs stuck in tight trading ranges.

The dollar index versus a basket of six major currencies inched lower to 98.101 after advancing to 98.322 on Thursday, its highest since May 2017.

The euro rose 0.1 percent to $1.1140.

New orders for U.S.-made capital goods increased by the most in eight months in March. That followed other recent U.S. data that have eased fears of a sharp slowdown in the world’s biggest economy.

Data at 1230 GMT is expected to show that U.S. gross domestic product (GDP) increased 2.0 percent year-on-year in the first quarter.

“This week’s break in EUR/USD below $1.1200 has largely been a dollar story. Over the next few days, however, focus could return to Europe,” ING analysts said in a note, citing the election in Spain on Sunday, an S&P review of Italian sovereign debt ratings, and possible French economic reforms.

The Bank of Japan on Thursday put a time frame on its forward guidance for the first time by telling investors it will keep interest rates at super-low levels for at least one more year, in a move aimed at dispelling any doubt over its commitment to ultra-loose policies.

The yen was little changed on Friday, at 111.63 yen per dollar, after shedding 0.5 percent overnight.

“The Chinese PMI and the U.S. non-farm jobs report are due over the next week and both are expected to be quite good. There is also the next round of U.S.-China trade talks, which could further lift risk sentiment,” said Mitsuo Imaizumi, chief FX strategist at Daiwa Securities.

“The market could thus see a significant increase in ‘risk on’ during the Japanese holidays, pushing dollar/yen towards 113.00 yen.”

The Australian dollar rose 0.2 percent to $0.7027. The Aussie has lost nearly 2 percent this week, hitting a near four-month trough as soft domestic inflation data boosted the prospect of a rate cut by the Reserve Bank of Australia.

The New Zealand dollar rose 0.3 percent $0.6647.

Sterling, which has been hurt this week by dollar strength and concerns Brexit talks between the ruling Conservative and opposition Labour parties had run into the sand, clawed itself back above $1.29.