The greenback rallied after US President Donald Trump said that 25 per cent tariffs on neighbouring US nations are on track to go into effect next week, sending Mexico’s peso and Canada’s loonie sliding.
The Bloomberg Dollar Spot Index jumped 0.6 per cent, the largest intraday rise in three weeks, after Trump cited a Mar 4 implementation date in social media posts. The Canadian dollar slipped 0.7 per cent to 1.4436 per US dollar, while the peso fell as much as 0.6 per cent to 20.55 per US dollar.
“Markets were becoming ‘complacent’ about tariff risks,” said Yusuke Miyairi, a currency strategist at Nomura International. “It has become clear that Trump’s stance on implementing tough tariff measures” still exists, Miyairi added.
Currency traders in recent weeks have contended with a flurry of messages from the new Trump administration regarding the implementation of tariffs on major trading partners.
On Wednesday, Canada’s loonie and the Mexican peso saw an initial boost after Trump signalled the tariffs would go into effect in April, only for the White House to later say the deadline remains Mar 4. Trump on Wednesday also flagged the possibility of 25 per cent tariffs on imports from Europe. Among the trade restrictions already in place are 10 per cent levies against Chinese goods.
Investors bid up the greenback following Trump’s election in November on the view that tariffs would drive inflation in the US and support bond yields, although that view has withered in recent weeks. The Bloomberg Dollar Spot Index gained roughly 4.5 per cent from election day until Jan 15. Since then, it is down about 1.5 per cent.
“If and when these tariffs actually go into effect, we could see a further run for the Bloomberg Dollar Spot Index, but it’s important to note that they may not be permanent,” said Helen Given, a foreign-exchange trader at Monex. “While volatility is a given, sustained dollar strength is not necessarily.” BLOOMBERG
Share with us your feedback on BT’s products and services
