SINGAPORE- The dollar regained some lost ground on Wednesday but was still languishing near a three-month low as US President Donald Trump again vowed reciprocal tariffs in his first speech to Congress since taking office.
Moves in currencies were volatile as investors continued to reel from a trade war triggered by Trump following his new 25 percent tariffs on imports from Mexico and Canada that took effect on Tuesday, along with a doubling of duties on Chinese goods to 20 percent.
Canada and China quickly acted in kind the same day, while Mexican President Claudia Sheinbaum vowed retaliation but without details, saying she would announce Mexico’s response on Sunday.
Still, the greenback found its footing on Wednesday as Trump repeated his threat of reciprocal tariffs on other countries on April 2 in a speech to Congress, giving some safe-haven support to the currency.
“The dollar regained some losses after Trump touched on retaliatory tariffs, owing to uncertainty weighing on sentiment and worries over a pick up in US inflation,” said Christopher Wong, a currency strategist at OCBC.
Uncertainty over Trump’s tariffs threats and an escalation of global trade tensions have jolted markets as investors try to assess their implications on the global economy.
The firmer dollar knocked the euro off a more than three-month top of $1.0637 hit earlier in the session, though the common currency didn’t stray too far from its high and last traded 0.1 percent lower.
The euro had surged 1.3 percent on Tuesday on news that the parties hoping to form Germany’s next government agreed to create a 500 billion euro ($530.95 billion) infrastructure fund and to overhaul borrowing rules in a tectonic spending shift to revamp the military and revive growth.
“If we get an unexpectedly large lift in the debt brake, I think it can probably push the euro up further, and of course, any further announcements on increased defense spending will also bolster expectations for European growth and therefore support the euro,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
