by Alden Bentley
NEW YORK (Reuters): President-elect Donald Trump’s pledge to impose tariffs on products from Canada, Mexico and China caused their currencies to weaken against the dollar on Tuesday, renewing the specter of trade wars and stoking uncertainty in other currency pairs.
Late Monday, Trump said he would impose a 25% tariff on all products from Mexico and Canada on his first day in office. On China, he said Beijing had not taken decisive enough action to restrict exports of ingredients used in illicit drugs by imposing “an additional 10% tariff rate on top of any additional tariffs on all numerous products imported into the United States of America.” “
Trading was weak ahead of Thursday’s U.S. Thanksgiving holiday, which carries over to Friday, when many traders take another day off.
The dollar rose more than 2.5% against the peso to its highest level since July 2022 in afternoon trading in New York. It peaked on November 6, after Trump – a longtime supporter of tariffs who renegotiated the North American Free Trade Agreement with Canada and Mexico during his first term – won the November 5 election. It was last at 20,685 pesos.
“As we find ourselves in this week, I don’t think these statements have caused all the damage that we are yet to see. But of course the peso is vulnerable to hitting these multiple year-to-date lows against the U.S. dollar,” said Juan Perez, chief trading officer at Monex USA in Washington.
Mexican President Claudia Sheinbaum warned on Tuesday of the serious economic consequences of the tariffs for both countries and hinted at possible retaliation.
The dollar hit a 4.5-year high against its Canadian counterpart, rising more than 1.5%, and was last up 0.61% at C$1.41.
“The Canadian dollar has actually managed to stabilize to some extent. The biggest loser is still the peso. “As a result, we have lost approximately 2% on a peso basis against the US dollar,” said Shaun Osborne, chief currency strategist at the firm Scotiabank (TSX:) in Toronto.
The US currency also rose to its highest level since July 30 at 7.2631 yuan.
“I think we had a great example last night of why volatility is more likely under Trump,” said Jane Foley, head of currency strategy at Rabobank.
“He might just make a comment like that outside of normal U.S. market hours, which surprises people. This has investors and everyone struggling to understand what this really means.”
The dollar was otherwise mixed a day after falling on Trump’s late Friday announcement of the appointment of hedge fund manager Scott Bessent as U.S. Treasury secretary, which boosted government bonds and pushed yields lower.
It was trading 0.57% lower at 153.33 yen, while the euro, which was steady in the morning, was 0.33% lower at $1.0459.
Both pairs recovered somewhat after the Federal Reserve released the minutes of its November meeting, at which it cut its key interest rate by another 25 basis points to 4.50% to 4.75%, showing many policymakers agreed that it was appropriate to gradually reduce the restraint on politics.
“Participants noted that monetary policy decisions had no predetermined course and depended on the evolution of the economy and the consequences for the economic outlook. … They stressed that it would be important for the (Federal Open Market) Commission to make this clear as it adjusted its policy position,” the minutes read.
The most important press release coming out this week will be Wednesday, which will include the October personal spending price index.
The dollar measured against six competing currencies, including the euro and the yen, at 107.15, down from 106.86 late Monday.
“I don’t think the fact that Japan and the eurozone were necessarily included in the overnight tariff considerations precludes them from any short-term risk that they will also be singled out for tariff action,” Osborne said. “We know Trump is not particularly happy with Europe and its trade relations with the US.”
Perez said the tariff news makes the yen a safe and sound haven. “Any kind of turbulence and disruption that may come China’s way will not necessarily always be to Japan’s advantage, but it does open up space for Japan to renegotiate a greater place of leadership in Asia.”
The Australian dollar fell to a more than three-month low of $0.6434 at the start of trading in Asia, and recently fell 0.83% to $0.6448. It is often sold as a liquid replacement currency for the yuan because China is Australia’s largest trading partner. [AUD/]
On the cryptocurrency front, bitcoin was trading at $91,738, well below the record high of $99,830 it hit last week.
achieved profit-taking before the symbolic $100,000 barrier, after rising more than 40% since the US election on expectations that Trump would loosen the regulatory environment for cryptocurrencies.
