Dollar Soars as Latest Vow of US Tariffs Hits Loonie and Peso
Currency traders bought the dollar after Donald Trump confirmed the launch of 25% tariffs against Canada and Mexico next week and raised the prospect of fresh levies on China.
The tested strategy sent a Bloomberg gauge of the greenback up the most in three weeks. The currencies tied to Trump’s targets — Mexico’s peso, Canada’s loonie and China’s offshore yuan — all slid after the US president’s remarks.
“Much has been said about the market’s fatigue in responding to each and every tariff headline – that is not what is on display today,” said Kyle Chapman, a foreign-exchange markets analyst at Ballinger Group in London.
The Canadian dollar was down about 0.7%, the peso about 0.3%, and the yuan around 0.4% against the greenback toward the end of the New York session.
Buying the greenback has been a cornerstone of the so-called “Trump trade” since the Republican’s days on the campaign trail, catching steam in the wake of his November election. Investors viewed a mix of tariffs, tax cuts and deregulation as likely to drive inflation in the US and support bond yields.
However, that conviction has faded in recent weeks as fatigue about contradictory vows — combined with concern about the negative growth impacts of tariffs — came into focus. The Bloomberg Dollar Spot Index gained roughly 4.5% from Election Day through Jan. 15. Since then, it’s down about 1.5%.
Source: Bloomberg
