TOKYO : The U.S. dollar firmed above an 11-week trough on Thursday as vague pledges from President Donald Trump to impose tariffs on Europe and further delays to levies planned for Canada and Mexico stoked uncertainty.
The euro steadied after falling further from a one-month high of $1.0529 in the previous session, as traders took a wait-and-see approach to Trump floating on Wednesday a vague 25 per cent “reciprocal” tariff on European cars and other goods.
The euro was down 0.06 per cent at $1.0479, with traders also awaiting any progress on efforts to form a coalition government in Germany following the election victory of the country’s conservatives.
Trump also said steep 25 per cent tariffs on Mexican and Canadian goods could take effect on April 2 instead of the previously stated deadline of March 4.
But a White House official stated levies on Mexican and Canadian goods remained in effect “as of this moment,” pending Trump’s review of both nations’ actions to secure their borders and halt the flow of migrants and the opioid fentanyl into the United States.
The confusion kept currencies largely within recent ranges, with the Canadian dollar under pressure near a two-week low against the greenback, while the Mexican peso hovered at 20.408.
The dollar index, which measures the U.S. currency against the euro and a handful of other major peers, rose 0.10 per cent to 106.56, edging further off a more than two-month low of 106.12 touched on Monday.
“We know that Trump can say what he wants when he wants, and only some of his threats come to fruition, which is likely why currency traders took his latest comments within stride,” said Matt Simpson, senior market analyst at City Index.
“Ultimately, markets seem to be waiting for a real catalyst with substance, and Trump’s mixed messaging was not one,” said Simpson.
But the shifting tariff messages have fanned worries about U.S. economic growth and inflation, sending the greenback down nearly 4 per cent from a more than two-year high hit in January.
A recent string of data, including weak U.S. business activity in February, and a sharp drop in consumer confidence, have raised concerns about the strength of the U.S. economy and persistent inflation, causing U.S. Treasury yields to tumble.
The anxiety over economic growth has bolstered expectations the U.S. Federal Reserve will deliver at least two rate cuts this year, with markets pricing in about 58 basis points of easing for 2025, although rates are expected to remain on hold for the next several months.
Elsewhere, the dollar was nearly flat at 149.17 against the yen, but not far off its weakest level since early December it hit against the Japanese currency earlier this week.
The fall in U.S. Treasury yields has helped to lift the yen while Japanese yields have also been pushed up on bets that the Bank of Japan (BOJ) will continue to raise interest rates.
Japan’s top currency diplomat, Atsushi Mimura, said on Wednesday he did not see any disparity between recent rises in the yen and a slew of positive economic data, underscoring Tokyo’s view that the currency’s rebound was broadly in line with an improving economy that could justify BOJ hikes.
Sterling hovered below Wednesday’s more than two-month high of $1.2717 and last fetched $1.2667.
The Aussie remained on the back foot, down 0.04 per cent at $0.6303 near a two-week low brushed in the previous session, while the New Zealand dollar was mostly unchanged at $0.5696.
