NEW YORK, Feb 1 — The US dollar advanced against major currencies yesterday, while the Canadian dollar weakened and the Mexican peso edged higher after the White House reiterated that President Donald Trump will impose tariffs today.
Reuters had earlier reported, citing sources familiar with the tariff deliberations, that Trump would announce tariffs on Canadian and Mexican imports on Saturday but delay collection of the duties until March 1 and offer a limited process for certain imports to be exempted.
White House spokesperson Karoline Leavitt denied the report, calling it “false”, adding that tariff duties would be published on Saturday and would take effect immediately.
Earlier yesterday, US Commerce Department data showed that the Personal Consumption Expenditures (PCE) Price Index rose 0.3 per cent last month, the largest increase since last April, amid a surge in consumer spending, suggesting the Federal Reserve would probably be in no hurry to resume cutting interest rates.
“It’s very much tariffs and the administration that’s driving this over-dollar-strength move; one of the biggest challenges is that the stronger dollar has been one trade that has sustained itself if you wanted to put out a theory that there’s a Trump trade out there,” said Marvin Loh, senior global market strategist at State Street in Boston.
“The dollar trade is one of the most overpositioned at this point. It does need a catalyst to continue to move up. But the threats and/or actions where we get to see tariffs over the weekend is what’s driving the story now,” Loh said.
The US dollar advanced 0.12 per cent against the Canadian dollar, rebounding from a slight decline following the Reuters report. The currency is still trading near five-year highs at CUS$1.451 and notched a weekly gain of nearly 1.1 per cent.
The Mexican peso was up 0.17 per cent at 20.728 per dollar. The currency recorded its worst weekly performance since October.
The dollar strengthened 0.54 per cent to 155.13 against the Japanese yen, notching three straight weeks of gains. Against the Swiss franc, the dollar added 0.1 per cent to 0.9016, gaining 0.5 per cent for the week and snapping two consecutive weeks of losses.
The euro dipped 0.3 per cent to US$1.0367. It recorded a 1 per cent weekly decline, the biggest loss since December 30. For the month, it was up 0.23 per cent — the biggest gain since September last year.
Bank of Japan Governor Kazuo Ueda said the central bank must maintain loose monetary policy to ensure underlying inflation gradually accelerates toward its 2 per cent target. Data yesterday showed core inflation in Tokyo hit 2.5 per cent, the fastest annual pace in nearly a year.
The European Central Bank cut interest rates on Thursday and policymakers left the door open for another cut in March, as concerns over lacklustre economic growth supersede worries about persistent inflation.
The Federal Reserve, meanwhile, kept rates steady this week and Chair Jerome Powell said there would be no rush to cut them again, though he also implied there was still scope for easing with rates being “meaningfully” above neutral.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.31 per cent to 108.42. It gained 0.93 per cent for the week, snapping two straight weeks of losses.
“We were expecting maybe some volatility around the data releases this morning, the US PCE and other things; but they were really in line and not much to write home about,” said John Velis, FX and macro strategist at BNY in New York.
“It just seems like, based on what happened yesterday afternoon in the White House, that traders are looking not to take big risks going into the weekend because obviously tomorrow’s February 1,” Velis added. — Reuters
