Trump tariff vow hits Mexican and Canadian currencies, yen firm By Reuters

By Alden Bentley

NEW YORK (Reuters) -A pledge by President-elect Donald Trump to impose tariffs on products from Canada, Mexico and China sent their currencies lower against the dollar on Tuesday, renewing the specter of trade wars and fanning uncertainty in other currency pairs.

Trump said late Monday that on his first day in office he would impose a 25% tariff on all products from Mexico and Canada. On China, he said Beijing was not taking strong enough action to curb the export of ingredients used in illicit drugs, floating “an additional 10% tariff, above any additional tariffs, on all of their many products coming into the United States of America.”

Trading was thin ahead of Thursday’s U.S. Thanksgiving holiday, which spills into Friday when many traders take another day off.

The dollar jumped more than 2.5% against the peso to its highest since July 2022 in New York afternoon trade. It eclipsed its peak from Nov. 6 after Trump – a longtime tariff proponent who renegotiated the North American Free Trade Agreement with Canada and Mexico during his first term in office – won the Nov. 5 election. It was last at 20.685 pesos.

“Because we are in the week that we’re in, the statements have not, I don’t think, caused all of the damage that we are yet to see. But, of course, the peso is vulnerable to falling into those multi-year lows against the U.S. dollar,” said Juan Perez, director of trading at Monex USA, in Washington.

Mexican President Claudia Sheinbaum on Tuesday warned of dire economic consequences for both countries from tariffs and suggested possible retaliation.

The dollar hit a 4-1/2-year high against its Canadian counterpart, rising more than 1.5%, and was last up 0.61% at C$1.41.

“The Canadian Dollar has actually managed to stabilize to some extent here. The biggest loser still the peso. So we went down about 2% in terms of the peso against the U.S. dollar,” said Shaun Osborne, chief foreign exchange strategist at Scotiabank (TSX:) in Toronto.

The U.S. currency also rose to its highest since July 30 against and was trading at 7.2631 yuan.

“I think we had a perfect example last night of why volatility is more likely under Trump,” said Jane Foley, head of FX strategy at Rabobank. 

“He can just put out a comment like that outside of usual U.S. market hours that takes people by surprise. It leaves investors, everybody scrambling to work out what this really means.”

Otherwise, the dollar was mixed a day after falling on the back of Trump’s late Friday naming of hedge fund manager Scott Bessent to become U.S. Treasury secretary, which buoyed government bonds and sent yields lower.  

It was trading 0.57% lower at 153.33 yen while the euro, having been steady in the morning, was 0.33% easier at $1.0459.

Both pairs trimmed losses a bit after the Federal Reserve released the minutes of its November meeting where it lowered the policy rate another 25 basis points to 4.50% to 4.75%, showing many policymakers in agreement that it was appropriate to reduce policy restraint gradually.

“Participants noted that monetary policy decisions were not on a preset course and were conditional on the evolution of the economy and the implications for the economic outlook. … They stressed that it would be important for the (Federal Open Market) Committee to make this clear as it adjusted its policy stance,” the minutes read.

The main scheduled news release left this week is on Wednesday with the October Personal Expenditures price index.

The measuring the greenback against six rival currencies, including the euro and the yen, was at 107.15, up versus 106.86 late Monday.

“I don’t think that fact that Japan and the euro zone weren’t necessarily included in these comments on tariffs overnight excludes them from any sort of near-term risk of being singled out for tariff action as well,” Osborne said. “We know that Trump is not particularly happy with Europe and its trade relationship with the U.S.”

Perez said the tariff news helps the yen as a safe haven. “Any type of turbulence and turmoil that may be thrown in the way of China, it’s not necessarily always going to be a benefit for Japan, but it opens room for Japan to negotiate more of a place of leadership once again in Asia.”

The Australian dollar sank to a more than three-month low of $0.6434 in early Asian trading and was last down 0.83% at $0.6448. The is often sold as a liquid proxy for the yuan given China is Australia’s biggest trading partner. [AUD/]

In cryptocurrencies, bitcoin was trading at $91,738, well below the record high of $99,830 it touched last week.

met profit-taking ahead of the symbolic $100,000 barrier, having climbed more than 40% since the U.S. election on expectations Trump will loosen the regulatory environment for cryptocurrencies.