SYDNEY: The dollar rebounded in choppy Asian trade on Tuesday after U.S. President Donald Trump suggested the United States could impose tariffs on Canada and Mexico in the near future, though details were lacking.
Trump was quoted saying his team was thinking of tariffs around 25% which could be announced on Feb. 1, but offered no other specifics.
The comments came as a surprise given officials had earlier signalled any new taxes would be imposed in a "measured" way, a major relief for trade-exposed currencies. A following memo merely directed agencies to investigate and remedy persistent trade deficits.
A tariff of "25% looks high as a starter, and markets reacted quickly, especially in FX", said Shoki Omori, chief global desk strategist at Mizuho Securities in Tokyo.
"I think market participants thought Trump would start with China, with say a 10-20% tariff on goods but gradual increase."
The market reaction was a knee-jerk fall in the Canadian dollar and Mexican peso, which helped the dollar pare losses suffered on Monday. The dollar climbed 1.2% to 1.4475 Canadian dollar, while adding 1.3% on the peso.
The dollar index bounced 0.6% to 108.65, having shed 1.2% overnight in what had been the sharpest daily loss since late 2023.
The euro fell back to $1.0364, from an early top of $1.0434. The EU runs a sizable trade surplus with the United States and has been seen as a major target for Trump's tariffs.
The dollar regained 0.3% on the Japanese yen to 156.06 , after earlier touching a five-week trough at 154.90.
The yen had made gains last week on growing expectations the Bank of Japan would raise rates at its policy meeting this Friday.
The dollar also added 0.3% on the Chinese yuan to 7.2847 . Trump has in the past threatened China with tariffs of up to 60%. - Reuters
