Dollar Halts as Tariff Uncertainty Grips Markets

23 Jan 2025 , 10:14 AM

The dollar maintained its near-paralysis of the previous two days prior to further specific tariff pronouncements from U.S. President Donald Trump on Thursday, remaining stable against key peers.

Over the course of the upcoming week, a number of central bank policy moves are also anticipated, with the Bank of Japan most likely raising interest rates following a two-day meeting on Friday.

The European Central Bank and the U.S. Federal Reserve are expected to make rate decisions on Thursday and Wednesday of next week, respectively.

After two days of advances of about 0.1%, the dollar index, which compares the currency to six major competitors, including the euro and yen, was unchanged at 108.25.

It fell 1.2% on Monday, the most since November 2023, as Trump’s first day in office delivered a slew of executive directives, but none pertaining to tariffs.

Trump has so far this week suggested taxes of about 10% on China and 25% on Canada and Mexico starting on February 1. Without providing specifics, he also pledged to impose levies on imports from Europe.

In offshore trading, the Chinese yuan barely moved, trading at 7.2812 to the US dollar.

As markets priced 95% odds of a quarter-point hike on Friday, the value of the Japanese yen increased by around 0.1% to 156.40.

At $1.0411, the euro was flat. Next week, a quarter-point rate drop by the ECB is generally anticipated.

At C$1.4386, the Canadian dollar remained stable in relation to the US dollar. Next Wednesday, the Bank of Canada is expected to lower interest rates by a quarter point.

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