China's Yuan, Mexican Peso, and Canadian Dollar Tumble Amidst Trade War Concerns
Offshore trading on Monday witnessed a record low for China's yuan. Mexico's peso and Canada's dollar also fell to multi-year lows due to President Donald Trump's imposition of tariffs on these nations, sparking concerns about an intensifying trade war.
The U.S. dollar surged across the board, with the euro hitting a two-year low and the Swiss franc, typically considered a safe haven, reaching its lowest level since May.
Canada and Mexico pledged retaliation, while China announced its intention to challenge the tariffs through the World Trade Organization. Cryptocurrency bitcoin plummeted below $100,000 to its lowest in almost three weeks.
Market analyst Tony Sycamore of IG expressed surprise at the immediate response from Canada and Mexico, along with the possibility of similar actions from China and the EU. He emphasized that the tariffs' implementation date of February 4th was sooner than anticipated.
As promised by Trump, the United States implemented tariffs of 25% on Canada and Mexico, and 10% on China, claiming these measures were necessary to address illegal immigration and drug trafficking. The tariffs, outlined in executive orders, will take effect on Tuesday at 12:01 a.m. ET (0501 GMT).
Trump's actions could trigger a damaging global trade war, leading to a rise in U.S. inflation that is expected to "arrive even faster and be larger than we initially anticipated," according to Paul Ashworth of Capital Economics.
The U.S. dollar gained 0.7% to 7.2552 yuan in the offshore market during early Asian trading hours, having previously reached a record high of 7.3765 yuan. The currency jumped 2.3% to 21.15 Mexican pesos, surpassing the 21-peso mark for the first time since 2022, and increased 1.4% to C$1.4755, a level not seen since 2003.
The euro dropped by 2.3% to $1.0125, its lowest level since 2022, before regaining some stability to trade at $1.0259. The greenback also gained against the Swiss franc, rising 1.1% to 0.9210 francs, its highest level since 2022, before settling at 0.9142 francs. Sterling weakened by 0.8% to $1.23. Japan's yen remained resilient, holding steady at 155.25 per dollar. Bitcoin dipped by 4.4% to $97,622.