Trade Fight Boosts U.S. Dollar Against Mexican, Canadian Currencies
By Ira Iosebashvili
The dollar rose against the currencies of Mexico and Canada, as investors continued to weigh the repercussions of looming global trade conflicts.
The dollar was recently up 0.7% at 1.2971 against the Canadian dollar, its highest level since last July. It gained 0.4% to 18.90 against the Mexican peso.
President Donald Trump on Monday increased pressure on the two U.S. trading partners, saying he would lift planned tariffs on steel imports only if Mexico and Canada sign a new version of the North American Free Trade Agreement, or Nafta.
Both countries depend heavily on exports to the U.S., making their currencies sensitive to potential changes in their trade status.
A broader measure of the U.S. currency showed the dollar little changed against a basket of its peers. The Wall Street Journal Dollar Index, which gauges the U.S. currency against a basket of 16 others, was recently up 0.1% at 83.79.
Over the long term, however, some analysts believe the dollar could decline in an environment of intensified global protectionism.
"In our view U.S.-inspired protectionism will prove bad for the dollar, bad for bonds and bad for stocks," said Steven Barrow, head of G-10 strategy at Standard Bank, in a note to investors.
The tough trade talk is shaking confidence in U.S. policy-making and could potentially impact the dollar's role in international lending and reserve holdings, Mr. Barrow said.
Some investors also fear the measures could spark inflation and provoke retaliation from U.S. trade partners. Big holders of U.S. Treasurys, including China, Japan and the European Union, could sell U.S. assets in response, analysts said.
Write to Ira Iosebashvili at firstname.lastname@example.org
(END) Dow Jones Newswires
March 05, 2018 13:27 ET (18:27 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.