Dollar climbs, stocks retreat after Trump vows tariffs
By Kevin Buckland and Ankur Banerjee
TOKYO (Reuters) -The dollar rallied sharply on Tuesday after U.S. President-elect Donald Trump pledged tariffs on all imports from Canada and Mexico, and additional tariffs on China.
Asian stocks declined, giving back some of the robust gains of the previous session, when they were buoyed by the nomination of fund manager Scott Bessent as Treasury Secretary, considered by investors as a voice for Wall Street in Washington.
Bessent's appointment had also led to a sharp fall in U.S. yields as investors scooped up Treasury bonds, sending the dollar sliding in the previous session.
"It's almost as if Trump wants to remind markets who is in control, after nominating Scott Bessent as Treasury Sec - a man markets expected to cool Trump's potency," said Matt Simpson, senior market analyst at City Index.
"With the Canadian dollar rising against the Mexican peso, markets are assuming this will hit Mexico the hardest."
The dollar jumped 1.5% to 20.5810 Mexican pesos as of 0549 GMT on Tuesday, and climbed 0.9% to C$1.4115.
It strengthened 0.25% to 7.2644 yuan in offshore trading, after earlier reaching the highest since late July at 7.2730 yuan.
Australia's risk-sensitive dollar - which also tends to reflect the outlook for top trading partner China - declined 0.25% to $0.6488, after earlier dipping to $0.64335 for the first time since Aug. 5.
"It was just last month that Trump said that 'the most beautiful word in the dictionary is tariff', so there really should not have been a surprise in Trump's intention, just in the timing of the comments," said Sean Callow, a senior FX analyst at ITC (NS:ITC ) Markets.
"The fall in trade-sensitive currencies makes sense, and should persist near term."
Japan's Nikkei dropped 1.4%, giving back Monday's gains, as investors contemplated the risks of tariffs on the nation's many heavyweight exports, particularly automakers. Toyota (NYSE:TM ) slid more than 2% and Nissan (OTC:NSANY ) tumbled almost 4%.
Australia's stock benchmark eased 0.69%, a day after rising to a record high. Taiwan's share index lost 0.9%.
However, Hong Kong's Hang Seng was flat, while mainland blue chips eased 0.2%, after fluctuating between small gains and losses.
Trump said in a post on Truth Social that on his first day in office he would impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on goods from China, citing concerns over illegal immigration and the trade of illicit drugs.
Trump has previously threatened to slap tariffs on Chinese imports in excess of 60%.
"It's definitely a shock to the market and weighing on Chinese assets, especially the export sectors," said Gary Ng, senior economist at Natixis.
"But compared to what he imposed on Canada and Mexico, the magnitude (of the Chinese tariff) is not that big, so investors might still want to see what are the follow ups and when/if the 60% promised will actually come through."
U.S. S&P 500 futures pointed 0.1% lower following a 0.3% gain in the cash index overnight.
Pan-European STOXX 50 futures dropped 0.9%.
The euro slipped 0.2% to $1.0475. Sterling lost 0.17% to $1.2548.
At the same time, the dollar weakened 0.3% to 153.66 yen, after initially strengthening following Trump's tariff remarks.
The dollar-yen pair tends to track long-term U.S. Treasury yields, which ticked up about 2 basis points to 4.2809% in Tokyo, but following a 15 basis-point slide on Monday.
Bitcoin rose 1% to $94,661, finding its feet following a pullback from last week's record high at $99,830. The token has benefited from speculation of an easier regulatory environment for cryptocurrencies under Trump.
Gold succumbed to the dollar's strength, dipping to a one-week low of $2,604.99.
Three-month copper on the London Metal Exchange was down 0.4% at $9,010.50 per metric ton, while the most-traded January copper contract on the Shanghai Futures Exchange eased 0.1% to 73,900 yuan a ton.
Oil prices rebounded slightly from the previous session's slump as investors weighed a potential ceasefire between Israel and Hezbollah.
Brent crude futures added 0.25% to $73.19 a barrel, while U.S. West Texas Intermediate crude futures rose 0.23% to $69.10 a barrel. Both benchmarks settled down $2 per barrel on Monday.
Source: Investing.com
