NEW YORK: Safe-haven currencies led by the US dollar and yen gained on Wednesday, as market jitters escalated amid the latest round of tariff threats from US President Donald Trump and contentious
talks to end the Russia-Ukraine war.
The greenback rose against currencies that investors buy when risk appetite is high such as the euro, sterling, the Australian and Canadian dollars and those in emerging markets like the Mexican peso.
The yen, on the other hand, advanced against most major currencies like the dollar, euro, Swiss franc, and sterling.
Those gains were fueled by comments from Trump late on Tuesday that he intends to impose auto tariffs “in the neighborhood of 25%” and similar duties on semiconductors and pharmaceutical imports.
On Friday, Trump said levies on automobiles would come as soon as April 2, the day after members of his cabinet are due to deliver reports to him outlining options for a range of import duties.
“The market is still all about tariff-related conversations. That’s still leading movements in FX currently especially as we approach the hard deadline on Canada and Mexico,” said Eugene Epstein, head of trading and structured products, North America, at Moneycorp in New Jersey.
The tariffs announced for Mexico and Canada have been delayed after negotiations with Trump’s counterparts in each nation.
“What we have seen over the last month and a half is volatility related to ‘will he or won’t he’, ‘will they or won’t they’. What we have now is some clarity.”
In late morning trade, the dollar was down 0.4% against the yen at 151.42, with the euro also dropping 0.6% to 157.87 yen.
The dollar extended losses against the Japanese currency after data showed US single-family homebuilding fell 8.4% in January to a seasonally adjusted annual rate of 993,000 units last month, amid disruptions from snowstorms and freezing temperatures.
The euro, meanwhile, slipped 0.2% versus the dollar to $1.0425. The dollar index, which essentially is a reverse proxy for the euro because the latter is the largest component of the index, last stood at 107.15, up 0.1%, after dropping 1.2% last week.
The pound got a short-lived boost from a stronger-than-expected UK inflation print. It hit a two-month peak overnight but last traded at $1.2590, down 0.2%.
UK inflation sped up by more than expected to hit a 10-month high of 3.0% in January and is likely to rise further, testing the Bank of England’s confidence price pressures will ease over the longer term.
The Trump administration said on Tuesday it had agreed to hold more talks with Russia on ending the war in Ukraine after an initial meeting that excluded Kyiv, a departure from Washington’s previous approach that rallied US allies to isolate Russian President Vladimir Putin.
Ukrainian President Volodymyr Zelenskiy, however, hit back on Wednesday at Trump’s suggestion Ukraine was responsible for Russia’s 2022 full-scale invasion, saying the US president was trapped in a Russian disinformation bubble.
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