Dollar strengthens

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SINGAPORE- The dollar firmed on Monday as traders pondered the ramifications of US President Donald Trump’s tariff plans at the start of a week in which the Federal Reserve is widely expected to hold interest rates steady.

Last week, the dollar clocked its weakest week since November 2023 as tariff fears ebbed, but the worries resurfaced as the US and Colombia pulled back from the brink of a trade war.

Charu Chanana, chief investment strategist at Saxo, said the Colombia tensions showed it was likely premature to put the tariff risks on the backburner.

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A Trump threat of tariffs on Colombia to punish it for refusing to accept military flights carrying deportees prompted the government in Bogota to threaten retaliatory tariffs. But the White House later said the South American nation had agreed to accept military aircraft carrying deported migrants.

The Mexican peso, a barometer of tariff worries, was 0.7 percent lower at 20.409 per dollar, while the Canadian dollar was a bit weaker at $1.4385. Trump said last week he may impose duties on products from Canada and Mexico from Feb. 1.

Elsewhere, the euro was 0.2 percent lower at $1.046725 ahead of a European Central Bank policy meeting this week expected to lower borrowing costs. Sterling last fetched $1.24505.

That left the dollar index which measures the US currency against six units, at 107.6, still close to the one-month low it touched last week. The index has risen nearly 4 percent since the US election in early November.

The prospect of high tariffs on goods from countries including China, Canada, Mexico, and the euro zone, has stoked concerns about a renewed bout of inflation, boosting Treasury yields and the US dollar in recent months.

Christopher Wong, currency strategist at OCBC, said the absence of any immediate tariffs is playing a bigger role in supporting risk sentiment and taming dollar bulls.

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