(Bloomberg) -- The dollar rallied against most major currencies after US President Donald Trump said he would announce tariffs on steel and aluminum imports, spurring a renewed rush to the reserve currency.
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The currencies of Norway, Canada and Australia were among the biggest losers against the greenback after Trump said he would announce 25% tariffs on the imports on Monday, with the duties applying to metal imports from all countries. The euro fell 0.3% and China’s offshore yuan slipped 0.2% on the news.
“The risk remains that tariffs incrementally escalate over time,” said Billy Leung, investment strategist at Global X ETFs. “That could fuel persistent inflation pressures, keep the Federal Reserve cautious on rate cuts, and reinforce policy divergence factors that support a stronger dollar.”
The dollar extended Friday’s 0.3% advance after Trump signaled that he would announce reciprocal levies on trading partners, without specifying the details. The world’s reserve currency has climbed around 7% from its September low, underscoring investors’ concerns about the inflationary effect of tariffs and how that might influence the Fed’s policy easing cycle.
Wall Street banks argue that the dollar’s strength has room to run even as traders mull the outcome of Trump’s on-again, off-again tariff threats. Goldman Sachs Group Inc. is expecting the dollar to break parity against the euro, while JPMorgan Chase & Co. predicts the greenback may buy around 1.50 Canadian dollars for the first time in a generation.
“The Trump administration is clearly aiming to use tariffs as a negotiating tool and also as a strategic or restructuring” avenue, said Rodrigo Catril, strategist at National Australia Bank Ltd. in Sydney. “We remain in a state of influx and the dollar is doing what it should amid heightened period of uncertainty.”
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