The dollar rose for the sixth time in the past seven months in August as escalation in the China-U.S. trade war sent traders toward the relative safety of the U.S. currency.
The Dollar Index, which measures the U.S. dollar against a basket of its developed-market peers, added 0.4% in August following a 2.5% gain in July that was the biggest since November 2016. It closed at 98.916 on Aug. 30, the highest level since May 2017.
The trade conflict between the U.S. and China worsened rapidly last month when President Donald Trump's administration announced Aug. 1 that it would impose long-threatened 10% tariffs on $300 billion of Chinese goods. China took retaliatory measures Aug. 23. The same day, Trump tweeted that the tax on $300 billion of Chinese imports would be increased to 15%, and ordered U.S. companies to find new suppliers outside of China.
"Quite simply put, President Trump's moves to intensify the trade war will likely have the perverse effect of boosting the dollar against most currencies," Win Thin, global head of currency strategy at Brown Brothers Harriman, wrote in a note.
The U.S. currency rose against all of its G-10 peers, apart from fellow safe havens the Japanese yen, against which it lost about 2%, and the Swiss franc, which rose by 0.5%. The dollar rose the most against the New Zealand dollar (4.2%) and the Norwegian krone (3.3%), while gaining modestly on the euro (0.6%) and the British pound (0.25%).

Trump also berated Federal Reserve Chair Jay Powell on Aug. 23 for not cutting interest rates faster. Trump has called for the Fed's help in the trade war with China by weakening the dollar.
The president's efforts to slow the strengthening of the dollar will likely be ineffective even if the Federal Reserve were to meet his demands and cut rates by 100 basis points, Michael Hewson, chief market analyst at CMC Markets UK, wrote in a research note. "The reality is the U.S. dollar remains the best of a very sorry bunch in terms of yield and the strength of the U.S. economy," he said.
The yen was buoyed by both the rise in safe-haven demand for the currency and as the Bank of Japan moved to lift long-term yields by trimming its bond-purchase program. On Aug. 30, the BoJ cut purchases of five- to 10-year debt by 50 billion yen, or $470 million, then put plans in place to lower the buying range for those securities from September.
The Japanese economy has outperformed expectations so far in 2019 due to strength in GDP growth, capital spending, low inflation and unemployment rates, as well as a bright labor market, Sara Johnson, executive director of global economics for IHS Markit, said in an interview.
The Reserve Bank of New Zealand surprised markets with a larger than expected 50-basis-point rate cut Aug. 6, helping the country's currency to its biggest decline against the dollar since October 2017.
