Dollar jumps, stocks retreat after Trump vows to raise prices via Reuters
By Kevin Buckland and Ankur Banerjee
TOKYO (Reuters) – The dollar rose sharply on Tuesday after U.S. President-elect Donald Trump promised to impose tariffs on all goods from Canada and Mexico, as well as additional tariffs on China.
Stocks declined, returning some of the strong gains of the previous session, when they were encouraged by the appointment of fund manager Scott Besent as Secretary of the Treasury, who is considered by investors as the voice of Wall Street in Washington.
Bessent’s appointment also led to a sharp decline in US yields as investors piled into Treasury bonds, causing the dollar to slide in the past.
“It’s almost as if Trump wants to remind the markets who’s in charge, after appointing Scott Besent as Treasury Secretary – the man markets expect to cool Trump’s power,” said Matt Simpson, senior market analyst at City Index.
“With the Canadian dollar rising against the Mexican peso, the markets think this will hit Mexico hard.”
The dollar jumped 1.6% to 20.6000 Mexican pesos as of 0213 GMT on Tuesday, and was up 1% at C$1.4132.
It strengthened 0.2% to 7.2628 yuan in overseas trade, after reaching its highest since late July at 7.2730 yuan.
The risk-sensitive Australian dollar – which also often reflects the outlook for top trading partner China – fell 0.5% to $0.6474, after falling to $0.64335 for the first time since Aug. 5.
“It was last month that Trump said ‘the best word in the dictionary is tariff’, so there should have been no surprise about Trump’s intention, during the comments,” said Sean Callow, the official. FX analyst at ITC (NS:) Markets.
“The decline in trade-sensitive funds makes sense, and should continue soon.”
fell 1.2%, giving back much of Monday’s gains, as investors weighed the risk of tariffs on many of the nation’s exports, particularly automakers. Toyota (NYSE: ) slipped 2% and Nissan (OTC: ) fell 4%.
Australia’s stock index fell 0.46%, a day after hitting a record high. Taiwan’s stock index lost 0.8%.
However, Hong Kong added 0.6%, and mainland blue chips rose 0.2%, reversing earlier declines.
Trump said on his first day in office that he would impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on goods from China, citing concerns about illegal immigration and the illegal drug trade.
Trump has previously pledged to end China’s most-favored trade regime and impose tariffs on Chinese imports of more than 60%.
“It’s certainly shocking the market and worrying for Chinese goods, especially the export sector,” said Gary Ng, senior economist at Natixis.
“But compared to what he has imposed in Canada and Mexico, the size (of the Chinese tax) is not that big, so investors may still want to see what comes next and when the promised 60% will be realized.”
The US index was 0.1% lower following a 0.3% gain in the currency index overnight.
Pan-European STOXX 50 futures fell 1%.
The euro fell 0.4% to $1.0459. Sterling lost 0.34% to $1.2527.
Meanwhile, the dollar fell 0.1% to 154.04 yen, after strengthening for the first time following Trump’s comments.
The dollar-yen pair usually tracks long-term US Treasury yields, which reached 2 points to 4.2809% in Tokyo, but followed a slide of 15 points on Monday.
Gold succumbed to the dollar’s strength, sinking to a one-week low of $2,604.99.
rose 1% to $94,610, finding its feet following a pullback from last week’s record high of $99,830. The token has benefited from speculation of an easier regulatory environment for cryptocurrencies under Trump.
Oil prices extended the decline from the previous session as investors decided to stop the possible fire between Israel and Hezbollah.
Futures fell 0.38% to $72.73 a barrel, while US West Texas crude futures were at $68.62 a barrel, down 0.46%. Both benchmarks settled at $2 per barrel on Monday.
