Investing.com — Most Asian currencies headed lower on Tuesday, with the Chinese yuan falling to a four-month low against a stronger dollar, after newly-elected US President Donald Trump said he will impose additional trade tariffs on China, Mexico and Canada.
Trump threatened a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on goods from China.
Trading in Asia recovered and was last up 0.2% after paring some gains. On Monday, the appointment of Scott Bessent as Treasury Secretary led to a sharp fall in US interest rates and a deterioration of the dollar.
The Chinese onshore yuan pair rose 0.3% to the highest level since late July, while the offshore yuan was last up 0.2%.
Other regional currencies were also under pressure as concerns about global economic growth and trade friction weighed on sentiment.
The Singapore dollar rose 0.2%, while the Thai baht was 0.3% higher.
The Australian dollar pair, which is sensitive to possible trade frictions for China, fell 0.2%.
In contrast, the Japanese yen pair fell 0.4% as traders looked for safe havens amid renewed trade tensions.
Trump’s tariff promise puts pressure on Asian markets
Trump has previously vowed to revoke China’s most-favoured-nation trade status and impose tariffs of more than 60% on Chinese imports, a significant increase from tariffs imposed during his first term.
Trump’s tariff policy creates a challenging environment for Asian markets. Uncertainty about future US trade policy, exacerbated by a stronger dollar and rising inflationary pressures, has increased currency volatility across the region.
Economies that rely heavily on exports, such as South Korea, Taiwan and Malaysia, could see slower growth as U.S. demand for Asian goods weakens.
The South Korean won pair and the Taiwanese dollar were both 0.1% higher. The Malaysian ringgit pair rose 0.3%.
Regional economies with greater domestic consumption, such as India and Indonesia, may be somewhat insulated from the direct impact of tariffs. However, rising costs for imported goods and potential disruptions to global supply chains could still weigh on inflation and consumer confidence.
The Indian rupee pair was largely unchanged at 84.28, holding close to recent record highs.
BOK interest rate decision, Fed signals in focus
South Korea’s central bank will decide on interest rates on Wednesday, while India will release its report on Friday and China will release its figures on Saturday.
In the US, the Federal Reserve’s preferred inflation measure, the (PCE) price index, is expected to be released on Wednesday, which could provide clues to the Fed’s interest rate outlook. These are expected later on Thursday.
