The US dollar advanced against major currencies on Friday, while the Canadian dollar weakened and the Mexican peso edged higher ahead of a planned tariff threat by President Donald Trump.
The White House reiterated that Trump will impose tariffs on Canadian and Mexican imports, but delayed their collection until March 1. However, this announcement did little to dampen the dollar’s gains, with it rising 0.12% against the Canadian dollar and 0.54% against the Japanese yen.
The US Commerce Department reported a 0.3% increase in consumer spending last month, which could suggest that the Federal Reserve is less likely to cut interest rates soon. This news supported the dollar’s upward trend, with it gaining nearly 1.1% against the Canadian dollar and 0.5% against the Swiss franc.
The Bank of Japan’s monetary policy remains loose, with Governor Kazuo Ueda emphasizing the need for gradual inflation acceleration towards its 2% target. The European Central Bank also cut interest rates this week, leaving room for another cut in March.
In contrast, the Federal Reserve kept rates steady, and Chair Jerome Powell implied that there is still scope for easing with interest rates being “meaningfully” above neutral.
The US dollar index rose 0.31% to 108.42, gaining 0.93% for the week. Experts attribute the dollar’s gains to Trump’s tariff threats, saying it’s a high-risk, high-reward trade that needs a catalyst to continue moving up.
Source: https://www.reuters.com/markets/currencies/yen-set-best-january-seven-years-rates-path-diverge-2025-01-31