US Dollar Edges Higher as China Tariffs Kick In; Aussie, Yuan Slide
The dollar strengthened on Tuesday after U.S. tariffs on Chinese goods came into effect, triggering swift retaliation from Beijing and prompting a selloff in the Chinese yuan and the Australian dollar.
The Canadian dollar and Mexican peso also weakened, after rising the day before as those countries won a reprieve on their own U.S. tariffs. The euro declined, with Washington threatening the European Union may be next in line for trade levies.
U.S. President Donald Trump's administration imposed additional 10% tariffs on imports from China from 12:01 a.m. ET on Tuesday (0501 GMT).
The U.S. dollar index - a measure of the value of the greenback relative to a weighted basket of six major foreign currencies - rose 0.15% to 108.6.
China on Tuesday placed tariffs on U.S. imports, renewing a trade war between the world's top two economies as Trump claimed China was not doing enough to halt the flow of illicit drugs into the United States.
The Chinese yuan edged down about 0.35% to 7.3207 per dollar in offshore trading , although that was well back from the record trough reached on Monday of 7.3631 yuan. There is no official yuan trading until Wednesday, with mainland markets still closed for the week-long Lunar New Year holidays.
The Australian dollar , which often acts as a liquid proxy for the yuan because the Australian economy is highly exposed to China, fell 0.35% to $0.6206, well above Monday's low of $0.6085, the weakest level since April 2020.
The euro slid 0.15% to $1.0328, with market participants watching parity.
Money markets increased their bets on ECB rate cuts on Monday, pricing in a depo rate at 1.85% in December from 1.95% late on Friday. They are currently discounting 1.88%.
The Canadian dollar lost 0.15% to C$1.4451 against its U.S. counterpart on Tuesday, following a sharp rebound from a low of C$1.4792 on Monday, the weakest level since 2003.
The Mexican peso was flat at 20.3460 per dollar , well above the previous session's nearly three-year trough at 21.2882.
Sterling declined 0.25% to $1.2410, despite Trump's suggestion that Britain might be spared tariffs.
The U.S. dollar gained 0.5% to 155.50 yen .
Source : Reuters
