The U.S. dollar held steady on Friday as new tariffs on Chinese imports took effect, while the euro, yuan, and Australian dollar experienced slight declines. The Canadian dollar and Mexican peso also dipped after rebounding on Monday. President Trump’s administration implemented the latest tariffs as part of the ongoing trade dispute with China.
Canada and Mexico received a 30-day exemption from these duties. Despite the escalating trade tensions, most Gulf stock markets closed higher on Tuesday, with investors focusing on upcoming corporate earnings reports. The White House spokesperson, Karoline Leavitt, denied reports specifying the timing and implementation of the tariffs on Canadian and Mexican imports.
She stated that the duties would be announced on Saturday and take effect immediately. Economic data from the U.S. Commerce Department showed that the Personal Consumption Expenditures (PCE) Price Index increased by 0.3% last month, the biggest rise since April.
Dollar steady amid new tariffs
This surge in consumer spending suggests that the Federal Reserve may not rush to resume interest rate cuts. Marvin Loh, a senior global market strategist at State Street in Boston, attributed the dollar’s strength to tariffs and the administration’s actions, noting that it has been a sustained trade. The U.S. dollar gained 0.12% against the Canadian dollar, trading near five-year highs at C$1.451 and recording a weekly gain of nearly 1.1%.
The Mexican peso rose 0.17% to 20.728 per dollar, experiencing its worst weekly performance since October. The dollar strengthened against the Japanese yen, Swiss franc, and euro. Bank of Japan Governor Kazuo Ueda indicated that loose monetary policy must be maintained to gradually increase underlying inflation towards the 2% target.
The European Central Bank cut rates on Thursday, leaving the possibility of another cut in March open, prioritizing concerns about lackluster economic growth over persistent inflation. The dollar index, which measures the greenback against a basket of currencies, rose 0.31% to 108.42, gaining 0.93% for the week and ending two consecutive weeks of losses. John Velis, an FX and macro strategist at BNY in New York, noted that traders are cautious about taking significant risks going into the weekend due to the White House’s actions on Thursday afternoon.
