Dollar increases due to customs worries to Trump’s Colombian threat of Reuters

By Ankur Banerjee

Singapore (Reuters)-The dollar consolidated on Monday, when dealers about the effects of US President Donald Trump’s customs plans at the beginning of a week, in which the Federal Reserve is generally expected to keep interest rates stable.

The dollar recorded its weakest week since November 2023 last week, since the fear of tariffs from the Trump government subsided. However, these worries came out again after saying that he would impose extensive measures against Colombia.

The retaliation measures, including tariffs and sanctions, take place after the South American country has rejected two US military aircraft with migrants that should be deported against immigration policy as part of the procedure of the new US government.

This meant that the Mexican peso, a barometer of customs worries, slipped by 0.8 % to $ 20.426 per dollar in early trade. The Canadian dollar was a little weaker with $ 1.43715.

The euro noted 0.14 % lower at $ 1.0474 in the run -up to the monetary policy meeting of the European Central Bank this week, in which the central bank is likely to reduce credit costs. The pound of Sterling recently reached $ 1.24615.

The one, who measures the US currency compared to six units, was still 107.6 near the one-month low that he reached last week.

The focus of the investors will be on the central banks this week and how the political decision -makers will probably react after Trump has said that he wanted the Federal Reserve to reduce interest.

The Fed is expected to leave interest rates unchanged when it completes its two -day session on Wednesday. However, investors will pay attention to indications that an interest rate reduction could occur in March if inflation continues to go back to the annual goal of the US Federal Reserve.

Data from Friday showed that US business activity slowed down to a ninth monthly low in January due to the increasing price pressure, while the sales of existing homes in the United States rose to a 10-month high in December.

“The optimism with regard to Trump’s growth-friendly” America First “agenda has increased, the inflation pressure has strengthened to a four-month high and companies hire employees as quickly as it has not been since 2022,” said Kyle Chapman, foreign market analyst at Ballinger Group.

“This picture suggests a warming labor market again and speaks strongly for a longer break at the Fed.”

In other currencies, the Australian and New Zealand dollar were somewhat lower, but remained closer to their one -month highs that were reached last week. The Australian markets are closed on this day.

The Japanese yen increased almost 0.4 % to $ 155.41 per dollar in early trade after the Bank of Japan had raised interest rates on Friday since the global financial crisis in 2008 and raised their inflation forecast.

Boj-Gouvenur Kazuo Ueda said that the central bank would continue to raise interest rates, as wage and price increases increase, but gave only a few indications of the time and the pace of future interest rate increases.

Mark Dowding, Chief Investment Officer at RBC Bluebay Asset Management, said that the renewed attention that the Japan story granted could be a catalyst for the upgrading of the yen in the coming weeks.

“The Japanese currency remains extremely undervalued in most evaluation models and since the interest rate differences decrease, we assume that this will help to develop better in 2025.”