Dollar Soars on US-Colombia Trade Tensions

27 Jan 2025 , 10:08 AM

As traders considered the implications of U.S. President Donald Trump’s tariff intentions at the beginning of a week in which the Federal Reserve is largely expected to keep interest rates unchanged, the dollar strengthened on Monday.

Last week, the dollar saw its worst week since November 2023 due to waning concerns about Trump administration tariffs, but those concerns reappeared after he declared he would slap broad measures on Colombia.

The South American nation turned away two U.S. military planes carrying migrants who were being deported as part of the new U.S. administration’s immigration crackdown, prompting the retaliatory actions, which include tariffs and fines.

As a result, in early trading, the Mexican peso, a gauge of tariff concerns, fell 0.8% to 20.426 per dollar. At $1.43715, the Canadian currency was slightly depreciated.

Ahead of this week’s European Central Bank policy meeting, where the central bank is anticipated to reduce borrowing costs, the euro was down 0.14% at $1.0474. The recent price of sterling was $1.24615.

As a result, the dollar index, which compares the value of the US dollar to six other currencies, was at 107.6, which is still near the one-month low it reached last week.

Following Trump’s announcement that he wants the Federal Reserve to lower interest rates, investors will be watching the central banks this week to see how policymakers will respond.

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