Dollar Inches Higher as Trump Tariff Worries Return
The dollar firmed on Monday as traders pondered the ramifications of U.S. President Donald Trump's tariff plans at the start of a week in which the Federal Reserve is widely expected to hold interest rates steady.
Last week, the dollar clocked its weakest week since November 2023 as tariff fears ebbed, but the worries resurfaced as the U.S. and Colombia pulled back from the brink of a trade war.
Charu Chanana, chief investment strategist at Saxo, said the Colombia tensions showed it was likely premature to put the tariff risks on the backburner.
A Trump threat of tariffs on Colombia to punish it for refusing to accept military flights carrying deportees prompted the government in Bogota to threaten retaliatory tariffs. But the White House later said the South American nation had agreed to accept military aircraft carrying deported migrants.
The Mexican peso , a barometer of tariff worries, was 0.7% lower at 20.409 per dollar, while the Canadian dollar was a bit weaker at $1.4385. Trump said last week he may impose duties on products from Canada and Mexico from Feb. 1.
Elsewhere, the euro was 0.2% lower at $1.046725 ahead of a European Central Bank policy meeting this week expected to lower borrowing costs. Sterling last fetched $1.24505.
That left the dollar index , which measures the U.S. currency against six units, at 107.6, still close to the one-month low it touched last week. The index has risen nearly 4% since the U.S. election in early November.
The prospect of high tariffs on goods from countries including China, Canada, Mexico, and the euro zone, has stoked concerns about a renewed bout of inflation, boosting Treasury yields and the U.S. dollar in recent months.
The benchmark U.S. 10-year yield fell 3 basis points to 4.593% in Asian hours.
One focus this week will be how central banks and policymakers react after Trump said he wants the Federal Reserve to cut interest rates.
The Fed is expected to keep rates unchanged when it concludes a two-day meeting on Wednesday, though investors will be watching for clues on whether a rate cut could happen soon if inflation eases closer to the U.S. central bank’s 2% annual target.
Data on Friday showed that U.S. business activity slowed to a nine-month low in January amid rising price pressures. Separately, U.S. existing home sales increased to a 10-month high in December.
The Australian and New Zealand dollars edged lower but remained closer to their one-month highs touched last week. The Australian markets are closed for the day.
The Japanese yen changed hands at 155.88 per dollar after the Bank of Japan pushed its policy rate to the highest level since the global financial crisis and revised up its inflation forecasts.
BOJ Governor Kazuo Ueda said the central bank will keep raising interest rates as wage and price increases broaden out in the economy but he offered few clues on the timing and pace of future rate hikes.
Source : Reuters
