By Ankur Banerjee
SINGAPORE (Reuters) – The dollar strengthened on Monday as traders pondered the implications of U.S. President Donald Trump’s tariff plans at the start of a week in which the Federal Reserve is expected to keep interest rates steady.
The dollar experienced its weakest week since November 2023 last week due to tariff fears from the Trump administration, but those concerns resurfaced after he announced he would impose sweeping measures on the Colombia.
The retaliatory measures, including tariffs and sanctions, come after the South American country turned away two U.S. military planes carrying migrants deported as part of the new U.S. administration’s immigration crackdown.
That led the Mexican peso, a barometer of tariff concerns, to slide 0.8% to 20.426 per dollar in early trading. The Canadian dollar was a little weaker at $1.43715.
The euro was down 0.14% at $1.0474 ahead of the European Central Bank’s policy meeting this week, at which the central bank is expected to cut borrowing costs. The British pound last hit $1.24615.
That left the , which measures the U.S. currency against six units, at 107.6, still close to the one-month low it hit last week.
This week, investors will focus on central banks and how policymakers are likely to react after Trump said he wants the Federal Reserve to cut interest rates.
The Fed is expected to keep rates unchanged after its two-day meeting on Wednesday, although investors will be watching for any signs that a rate cut could come in March if inflation continues to approach l annual objective of 2% of the American central bank. .
Data released Friday showed U.S. business activity slowed to a 9-month low in January amid growing price pressures, while U.S. existing home sales rose to a 10-month high in December.
“Optimism has mounted over Trump’s pro-growth America First agenda, inflationary pressures have intensified to a four-month high, and businesses are hiring workers at the fastest pace since 2022 ” said Kyle Chapman, foreign exchange analyst at Ballinger Group.
“This picture suggests a warming labor market and strongly supports an extended pause at the Fed.”
In other currencies, the Australian and New Zealand dollars were slightly lower but remained closer to their one-month highs reached last week. Australian markets are closed for the day.
The Japanese yen appreciated nearly 0.4% to 155.41 per dollar in early trading after the Bank of Japan raised interest rates on Friday to their highest level since the global financial crisis. 2008 and revised upwards its inflation forecasts.
BOJ Governor Kazuo Ueda said the central bank would continue to raise interest rates as wage and price hikes become more widespread, but gave few clues on the timing and pace of increases. future rate increases.
Mark Dowding, chief investment officer at RBC BlueBay Asset Management, said renewed attention to Japan’s story could serve as a catalyst for the yen to appreciate in the coming weeks.
“The Japanese currency remains extremely undervalued on most valuation models and, as interest rate spreads narrow, we believe this will help the yen perform better in 2025.”
