Dollar Gains on Trump Steel Comments as Trade Anxiety Deepens
The dollar rose against most major currencies after U.S. President Donald Trump said he would announce tariffs on steel and aluminum imports, rekindling a rush to reserve currencies.
The Norwegian, Canadian and Australian currencies were among the biggest losers against the greenback after Trump said he would announce 25% tariffs on imports of the metal on Monday, with duties applying to metal imports from all countries. The euro fell 0.3% and China’s offshore yuan fell 0.2% on the news.
“The risk remains that tariffs gradually increase over time,” said Billy Leung, investment strategist at Global X ETFs. “That could fuel persistent inflationary pressures, make the Federal Reserve cautious about cutting rates, and reinforce the policy divergence factors that support a stronger dollar.”
The dollar extended its 0.3% gain on Friday after Trump hinted at announcing reciprocal levies on trading partners, without specifying what those would be. The world’s reserve currency has risen about 7% from its September low, underscoring investor concerns about the inflationary impact of tariffs and how that could affect the Fed’s policy-easing cycle.
Wall Street banks say the dollar’s strength still has room to run even as traders weigh the outcome of Trump’s sometimes-once-against-some-other tariff threats. Goldman Sachs Group Inc. predicts the dollar will break parity against the euro, while JPMorgan Chase & Co. predicts the greenback could buy about 1.50 Canadian dollars for the first time in a generation.
“The Trump administration is clearly looking to use tariffs as a negotiating tool and also as a strategic or restructuring tool,” said Rodrigo Catril, a strategist at National Australia Bank Ltd. in Sydney. “We remain in a state of inflows and the dollar is doing what it’s supposed to do in a period of heightened uncertainty.”
Source: Bloomberg
