By Alden Bentley
NEW YORK (Reuters) -A pledge by President-elect Donald Trump to impose tariffs on products from Canada, Mexico and China sent their currencies lower against the dollar on Tuesday, renewing the specter of trade wars and fanning uncertainty in other currency pairs.
Trump said late Monday that on his first day in office he would impose a 25% tariff on all products from Mexico and Canada. On China, he said Beijing was not taking strong enough action to curb the export of ingredients used in illicit drugs, floating "an additional 10% tariff, above any additional tariffs, on all of their many products coming into the United States of America."
Trading was thin ahead of Thursday's U.S. Thanksgiving holiday, which spills into Friday when many traders take another day off.
The dollar jumped more than 2.5% against the peso to its highest since July 2022 in New York afternoon trade. It eclipsed its peak from Nov. 6 after Trump - a longtime tariff proponent who renegotiated the North American Free Trade Agreement with Canada and Mexico during his first term in office - won the Nov. 5 election. It was last at 20.685 pesos.
"Because we are in the week that we're in, the statements have not, I don't think, caused all of the damage that we are yet to see. But, of course, the peso is vulnerable to falling into those multi-year lows against the U.S. dollar," said Juan Perez, director of trading at Monex USA, in Washington.
Mexican President Claudia Sheinbaum on Tuesday warned of dire economic consequences for both countries from tariffs and suggested possible retaliation.
The dollar hit a 4-1/2-year high against its Canadian counterpart, rising more than 1.5%, and was last up 0.61% at C$1.41.
"The Canadian Dollar has actually managed to stabilize to some extent here. The biggest loser still the peso. So we went down about 2% in terms of the peso against the U.S. dollar," said Shaun Osborne, chief foreign exchange strategist at Scotiabank in Toronto.
The U.S. currency also rose to its highest since July 30 against China's yuan and was trading at 7.2631 yuan.
"I think we had a perfect example last night of why volatility is more likely under Trump," said Jane Foley, head of FX strategy at Rabobank.
"He can just put out a comment like that outside of usual U.S. market hours that takes people by surprise. It leaves investors, everybody scrambling to work out what this really means."
Otherwise, the dollar was mixed a day after falling on the back of Trump's late Friday naming of hedge fund manager Scott Bessent to become U.S. Treasury secretary, which buoyed government bonds and sent yields lower.