Author: Kevin Buckland
TOKYO (Reuters) – The dollar fell slightly in choppy trading on Wednesday as a lack of clarity on President Donald Trump’s plans for tariffs kept financial markets guessing.
Trump said late Tuesday at the White House that his administration was considering imposing 10% tariffs on goods imported from China on February 1, the same day he previously said Mexico and Canada would face tariffs of around 25%.
He also promised tariffs on European imports without giving further details.
Despite those threats, the lack of concrete plans from Trump’s first day in office saw the dollar start the week down 1.2% against a basket of major competitor markets. It steadied on Tuesday, ending unchanged after a failed recovery attempt, with US officials saying any new taxes would be imposed in a measured manner.
which tracks the currency against the euro, yen and four other major rivals, was down 0.14% at 108 by 0054 GMT.
The euro slipped 0.07% to $1.0420, while the yen rose slightly to $155.40.
“While Trump has threatened tariffs of up to 25% on Mexico and Canada, he has refrained from enacting them despite signing several executive orders,” said Tony Sycamore, an analyst at IG.
“His decision not to target China was seen as a possible sign of a more cautious approach to tariffs than he promised during his campaign, reducing inflation risks and potential hawkish action by the Federal Reserve.”
Traders expect the Fed to cut interest rates by a quarter of a point by July, while another cut by the end of the year is seen as a coin toss.
Elsewhere, expectations are rising that the Bank of Japan will raise rates by a quarter point on Friday, supporting the yen.
it was unchanged at 7.2735 per dollar in offshore trading, after hitting its strongest level since Dec. 11 at 7.2530 on Tuesday.
“Tariffs of 10% on imports from China would be far below the 60% rate he mentioned in his campaign,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“On top of that, the general feeling is that Trump is not pursuing maximalist trade protectionism in his early actions, but appears to be setting himself up for trade negotiations,” Tan said.
“All of this suggests that the US dollar could fall further.”
The Canadian dollar was down about 0.1% at C$1.4335 per dollar, after a volatile week that saw it fall as low as C$1.4520 overnight for the first time since March 2020, feeling added pressure from slowing inflation last month .
The Mexican peso also fell 0.1% to 20.6350 to the dollar.
