(Bloomberg) -- The dollar advanced against most major currencies after President Donald Trump said he may enact 25% tariffs on Mexico and Canada next month.
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In a turbulent 24 hours of trading, Bloomberg’s dollar gauge rebounded from its steepest drop in 14 months to trade as much as 0.7% higher as headlines on fresh tariffs spurred a rush to the reserve currency. The Canadian dollar and Mexican peso fell more than 1% against the greenback on the news.
“If 25% tariffs on Mexico and Canada are coming, then surely bigger tariffs on China will be following shortly after,” said Rodrigo Catril, strategist at National Australia Bank Ltd. in Sydney. “The dollar has room to trade higher.”
The dollar’s surge underscores just how jittery traders are on any news around duties and their impact across the global economy. Compounding volatility were headlines Monday on how Trump would hold off on implementing tariffs immediately after his inauguration, spurring whipsaws across the $7.5 trillion-a-day foreign-exchange market.
The Treasury 10-year yield was down six basis points on the day at 4.56%, paring a drop of as much as nine basis points earlier. The offshore yuan fell 0.2% after gaining more than 1% in New York trading.
(Updates with analyst comment in 3rd paragraph.)
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