TOKYO- The dollar rallied sharply on Tuesday after US President-elect Donald Trump pledged tariffs on all imports from Canada and Mexico, and additional tariffs on China.
Asian stocks declined, giving back some of the robust gains of the previous session, when they were buoyed by the nomination of fund manager Scott Bessent as Treasury Secretary, considered by investors as a voice for Wall Street in Washington.
Bessent’s appointment had also led to a sharp fall in US yields as investors scooped up Treasury bonds, sending the dollar sliding in the previous session.
“It’s almost as if Trump wants to remind markets who is in control, after nominating Scott Bessent as Treasury Sec – a man markets expected to cool Trump’s potency,” said Matt Simpson, senior market analyst at City Index.
“With the Canadian dollar rising against the Mexican peso, markets are assuming this will hit Mexico the hardest.”
The dollar jumped 1.5 percent to 20.5810 Mexican pesos on Tuesday, and climbed 0.9 percent to C$1.4115
It strengthened 0.25 percent to 7.2644 yuan in offshore trading after earlier reaching the highest since late July at 7.2730 yuan.
Australia’s risk-sensitive dollar – which also tends to reflect the outlook for top trading partner China – declined 0.25 percent to $0.6488, after earlier dipping to $0.64335 for the first time since Aug. 5.
“It was just last month that Trump said that ‘the most beautiful word in the dictionary is tariff’, so there really should not have been a surprise in Trump’s intention, just in the timing of the comments,” said Sean Callow, a senior FX analyst at ITC Markets.
“The fall in trade-sensitive currencies makes sense, and should persist near term.”
Japan’s Nikkei dropped 1.4 percent, giving back Monday’s gains, as investors contemplated the risks of tariffs on the nation’s many heavyweight exports, particularly automakers. Toyota slid more than 2 percent and Nissan tumbled almost 4 percent. Australia’s stock benchmark eased 0.69 percent, a day after rising to a record high. Taiwan’s share index lost 0.9 percent.
