In This Article:
(Bloomberg) -- The US dollar is once again showing off how it’s become a popular way to trade tariff threats, rallying after President Donald Trump said he favors imposing “much bigger” levies than had been suggested by one of his top officials.
Most Read from Bloomberg
-
NYC Subway’s Most Dangerous Stations Are on Lexington Ave. Line
-
Texas HOA Charged With Discrimination for Banning Section 8 Renters
-
Newsom Enlists Magic Johnson, Guggenheim CEO for LA Rebuilding
The Bloomberg Dollar Spot Index rose as much as 0.5%, the biggest intraday advance in a week, as Trump vowed tariffs bigger than those reportedly under consideration by incoming Treasury Secretary Scott Bessent. The recent wobble in the stock market tied to Chinese AI startup DeepSeek’s cheaper model is also driving demand for the world’s reserve currency.
“The dollar stays strong until proven otherwise,” said Kathy Jones, chief fixed-income strategist at Charles Schwab & Co. “I do think it has room to come down and probably will at some point, but the tariff threat out there will stay as a bargaining chip, if not an actual thing.”
Trump’s remarks and appetite for safety sparked a bid for the US currency that rippled through Asian and European markets and continued into the close of trading in New York. The Bloomberg dollar gauge ended the session 0.3% higher as of 4 p.m. New York time.
Investors have piled into bullish dollar positions on bets that Trump’s policies would fuel price pressures and keep US interest rates elevated. If tariffs also reduced imports into the US, it would reduce the flow of dollars oversees, which would also likely bolster the currency.
The euro fell as much as 0.7% versus the dollar while the yen lost some 0.7%, leading a retreat among the Group-of-10. The risk-sensitive Australian dollar, seen as particularly exposed to the threat of US tariffs against China, underperformed peers. US Treasuries pared losses after a rally the previous day that had sent yields to the lowest levels this year. The 10-year yield was little changed at 4.54%.
Trump also strongly suggested he could impose specific levies on automobiles from Canada and Mexico — both of which he’s already threatened with 25% across-the-board tariffs as soon as Feb. 1. His remarks follow a brief spat with Colombia during which he threated to use tariffs to force the nation to accept flights of migrants being deported from the US, raising concerns that he will use such levies to strong-arm governments on issues far beyond trade.