Following U.S. President Donald Trump’s vague suggestion that the United States may soon slap tariffs on Canada and Mexico, the dollar recovered in turbulent Asian trade on Tuesday.
Trump did not provide any further details, but he was quoted as adding that his administration was considering 25% tariffs that might be announced on February 1.
The remarks were unexpected because officials had previously indicated that any new tariffs would be applied in a “measured” manner, which would have greatly benefited currencies that were exposed to trading. A subsequent memo only instructed agencies to look into and address ongoing trade deficits.
The Canadian dollar and Mexican peso fell precipitously as a result of the market reaction, which helped the dollar offset Monday’s losses. The peso gained 1.3%, and the dollar increased 1.2% to 1.4475 Canadian dollars.
After dropping 1.2% overnight—the biggest daily fall since late 2023—the dollar index recovered 0.6% to 108.65.
After peaking at $1.0434, the euro dropped back to $1.0364. Trump’s tariffs have been viewed as primarily targeting the EU, which has a significant trade surplus with the US.
After hitting a five-week low at 154.90, the dollar recovered 0.3% against the Japanese yen to 156.06.
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