The U.S. dollar surged on Monday, sending the Canadian dollar and Mexican peso to multi-year lows, while the Chinese yuan in offshore trading plummeted to a record low after President Donald Trump imposed sweeping tariffs, escalating trade tensions.
The dollar's gains were widespread, with the euro plunging to a two-year low and the Swiss franc, typically a safe haven, weakening to its lowest since May. Canada and Mexico, the top two U.S. trading partners, swiftly vowed retaliation, while China announced plans to challenge the tariffs at the WTO.
Market analyst Tony Sycamore noted the unexpected retaliatory measures by Canada and Mexico, with potential responses from China and the EU adding to concerns of a sharp contraction in global trade. The implementation of U.S. tariffs on February 4, earlier than expected, intensified market uncertainty.
As promised, the U.S. levied 25% duties on Canadian and Mexican imports and a 10% tariff on Chinese goods, citing economic security concerns. The move shook investor confidence, with Bank of Singapore's chief economist Mansoor Mohi-uddin warning of potential long-term economic consequences.
The U.S. dollar climbed 0.7% to 7.2552 yuan offshore, earlier touching a record high of 7.3765. It rose 2.7% to 21.40 pesos, a high not seen since 2022, and 1.4% to C$1.4755, its strongest level since 2003. The euro fell 2.3% to $1.0125 before recovering slightly.
The Federal Reserve’s expected rate cuts were also reevaluated, with traders reducing projections by 6 basis points. Bitcoin fell 4.4% to $97,622, while Ether plunged 15% to $2,812.
With markets bracing for further trade disruptions, analysts warn of stagflation risks, characterized by weak growth and rising inflation.


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