The U.S. dollar saw significant fluctuations yesterday as initial downplay of tariff concerns shifted to renewed anxiety over the prospect of 25% tariffs on Canada and Mexico starting February 1. This development roiled foreign exchange markets, with the dollar regaining strength. Among the hardest-hit currencies were the Canadian dollar in the G10 group and the Mexican peso among emerging markets. Meanwhile, gold surged to a two-month high near $2,733 before stabilizing, while March WTI crude oil dipped, touching last week’s low near $75.65.
Despite the turbulence, equities appeared resilient, with major Asia-Pacific markets rallying, Europe's Stoxx 600 posting modest gains, and U.S. index futures rising by about 0.5%.

Asia-Pacific Markets
The Japanese yen lagged behind in yesterday’s currency moves. Although it initially rose less than 0.5% against the dollar, it reversed course, with the dollar falling to JPY155.40 before declining further to JPY154.75 today—a new monthly low. Anticipation of a 25-basis-point hike by the Bank of Japan (BOJ) at the end of the week, potentially doubling its target rate to 0.50%, has kept the market cautious.

European Markets
In Europe, the euro extended its rebound from last Monday’s two-year low of $1.0170, climbing to $1.0430, buoyed by relief that the U.S. held off on immediate tariff implementation.
Sterling, meanwhile, briefly surpassed last week’s high, trading near $1.2345, before retreating to $1.2235. Earlier, UK labor data showed mixed signals: a slight acceleration in wage growth, a slowdown in job creation, and a marginal increase in the unemployment rate to 4.4% from 4.3%. Despite this, markets remain confident of a quarter-point rate cut at the Bank of England’s February 6 meeting.

American Markets
While the dollar was sold off yesterday as the market digested the absence of immediate new tariffs, Trump’s threat of imposing 25% tariffs on Canada and Mexico from February 1 reignited pressure on the greenback in early Asia-Pacific trading today. On the economic calendar, the Philadelphia Fed’s non-manufacturing survey is in focus. Notably, the manufacturing survey recently jumped to 44.3 from a revised -10.9, marking its highest level since April 2021. With the Federal Reserve in a self-imposed quiet period ahead of next week’s FOMC meeting, markets remain on edge awaiting further developments.
Trump's tariff threats and their potential economic impact have once again captured market attention, leaving investors balancing between geopolitical risks and regional economic data.