Dollar gains after Trump vows tariffs against Mexico and Canada

The dollar rose over 2 percent against the Mexican peso and 1 percent against its Canadian counterpart.

The US dollar rose broadly against major rivals on Tuesday after President-elect Donald Trump said he would sign an executive order imposing a 25 percent tariff on all products coming in to the United States from Mexico and Canada.

The dollar rose over 2 percent against the Mexican peso and 1 percent against its Canadian counterpart.

The dollar has been on the back foot in the past few days as U.S. Treasury markets cheered Trump’s pick of hedge fund manager Scott Bessent for U.S. Treasury secretary.

"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.

"But with the Canadian dollar rising against the Mexican Peso, markets are assuming this will hit Mexico the hardest."

While traders saw Bessent as an old Wall Street hand and fiscal conservative, he has also openly favoured a strong dollar and supported tariffs.

The dollar index, which measures the U.S. currency against six rivals, was last at 107.37. The euro fell 0.6% to $1.043175, while sterling was last down 0.4% at $1.2516.

The euro zone’s single currency had taken a hit on Friday as European manufacturing surveys showed broad weakness, while U.S. surveys surprised on the high side.

On China, the president-elect said Beijing was not taking strong enough action to stop the flow of illicit drugs crossing the border into the U.S. from Mexico by curbing the export of drugmaking ingredients.

"Until such time as they stop, we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America," Trump said in a social media post.

China has previously denied the allegations.

The Australian dollar fell 0.75% to $0.64555, while the New Zealand dollar touched a one-year low and was last at $0.58075.

Turning to cryptocurrencies, bitcoin was trading at $93,577, well below the record high of $99,830 it touched over the weekend.

Bitcoin met profit-taking ahead of the symbolic $100,000 barrier, having climbed more than 40% since the U.S. election earlier this month on expectations Trump will loosen the regulatory environment for cryptocurrencies.