Dollar steadies on renewed tariff worries

The dollar steadied on Tuesday, having fallen to its lowest in more than two months against a basket of major currencies a day earlier, buoyed by safe-haven flows after U.S. President Donald Trump said tariffs on Mexico and Canada would proceed as planned.

Trump on Monday said that tariffs on Canadian and Mexican imports were “on time and on schedule” despite efforts by the countries to beef up border security and halt the flow of fentanyl into the U.S. ahead of a March 4 deadline.

Many had hoped the top two U.S. trading partners could persuade Trump’s administration to further delay tariffs that would apply to over $918 billion worth of U.S. imports from the two countries, from autos to energy.

But Trump’s comments spurred a rush to safety assets like gold and U.S. Treasuries, and helped stabilise the dollar which has fallen some 3% from its January peak, after weaker-than-expected U.S. economic data that stoked worries over its growth outlook.

That left the euro at $1.04672, a touch off Monday’s one-month peak hit in the aftermath of the German election, and the pound at $1.2618, just off Monday’s two-month high.

The Japanese yen, which has been boosted by market bets on further rate hikes from the Bank of Japan, was steady at 149.5 per dollar, after reaching 148.5 per dollar on Monday, its strongest since mid December.

The combination of those moves left the dollar index, which tracks the unit against six peers, at 106.6, up from Monday’s two-month low of 106.1.

“Since the last week or two, the incoming economic news from the U.S. is really playing to this narrative that the U.S. is kind of losing its economic exceptionalism. But whenever we see a reasonable risk-off tone in equity markets … the dollar gets its sort of traditional safe-haven support,” said Ray Attrill, head of FX strategy at National Australia Bank.

That has left investor hopes of greater borrowing and spending, that would have a positive effect on the euro, up in the air.

By Rae Wee and Alun John

reuters

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