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(Bloomberg) — The Canadian dollar and Mexican peso rebounded as leaders from the neighboring US countries said they’d struck deals with President Donald Trump to delay tariffs for one month.
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The loonie, as Canada’s currency is known, surged more than 1% late in the Monday session — reversing an earlier 1.7% slide — after Canadian Prime Minister Justin Trudeau said new US tariffs would be paused 30 days after a call with the US leader. The peso was was up 1.5% after Mexican President Claudia Sheinbaum earlier said the nation had struck a similar standstill accord. It had earlier weakened by 3% against the dollar.
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“When it comes to Trump it’s hard for narratives to trade even for 24 hours before an unwind headline,” said Jordan Rochester, head of FICC strategy at Mizuho Bank Ltd.
The Bloomberg Dollar Spot Index was up just 0.2% after earlier soaring some 1.3% on tariff concerns. Both Canada and Mexico agreed they’d start addressing Trump’s concerns over the movement of fentanyl.
“Developments today may make investors more comfortable with the idea that the risk of hefty, long-lasting tariffs is lower now than it looked at the weekend — and perhaps that a bit of a wobble in the stock market can sway the president’s thinking,” said Shaun Osborne, chief currency strategist at Scotiabank.
The prospects of a trade war, which materialized over the weekend on Trump’s announcements of levies on Mexico, Canada and China, had investors piling into bullish dollar positions, betting that the tariffs would fuel inflation and limit the room for the Federal Reserve to cut interest rates.
Fed Atlanta President Raphael Bostic said Monday he wants to wait “a while” before cutting interest rates again following last year’s reductions amid uncertainty over where the US economy is headed in 2025.
Read: Trump’s Tariffs Aim a Wrecking Ball at Economy of the Americas
Tariffs that reduce imports into the US stand to reduce the flow of dollars overseas, which would likely bolster the currency. The dollar has surged roughly 4.6% since Trump won November’s presidential election.
The loonie has tumbled more than 4% since Trump’s election in November as Canada increasingly came under threat of trade restrictions from the new administration.
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