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Against the yen - traditionally seen as a safe haven - the
dollar edged down 0.2 percent to slip below 106 yen <JPY=>, not
far from the 16-month low the greenback had slid to late last
week after Trump announced plans to impose a hefty 25 percent
levy on steel imports, and 10 percent on aluminum.
Trump faced growing pressure on Monday to pull back from his
plans from political and diplomatic allies as well as U.S.
companies, but he said he would stick to his guns.
The dollar traded 0.1 percent lower on the day against a basket
of six major rivals <.DXY>.
"The market has to work out what the trade wars mean for the
U.S. dollar," said Rabobank currency strategist Jane Foley.
"While in the short term they might be seen as dollar-negative,
there's an argument to say in the medium term it could be
dollar-positive, because if growth really does slow down, and
moves out of emerging markets, then we could see a squeeze on
liquidity and some positive dollar momentum."
However, Foley added that the specter of trade wars were
unambiguously negative for the Canadian dollar, with Trump's
proposed tariffs on steel and aluminum - of which Canada is its
prime supplier - seen as a bargaining chip in talks to revamp
the North Atlantic Free Trade Agreement (NAFTA).
The Canadian dollar traded down a quarter of a percent on the
day at C$1.2995 against its U.S. counterpart <CAD=D3>, close to
an eight-month low of C$1.3002 set on Monday.
"The Canadian dollar is most affected by the step up in trade
war rhetoric," wrote Commerzbank currency strategists in a note
to clients.
"Tomorrow’s BoC (Bank of Canada) rate meeting will be decisive
for the immediate Canadian dollar outlook: if, despite the
recent developments, the BoC keeps the door open for further
rate hikes during the course of the year, the Canadian dollar is
likely to be able to resist further notable depreciation," they
added.
Sweden's crown slumped to a fresh eight-year low, after the
governor of the country's central bank said it should not move
too fast with normalizing monetary policy, or it could have a
negative effect on the crown.
The crown slipped 0.2 percent on the day to 10.2070 crowns per
euro <EURSEK=D3>, its weakest since February 2010.
The euro edged up 0.1 percent to $1.2347 <EUR=>, having
recovered from a brief selloff on Monday tied to Italy's
inconclusive weekend election.
(Reporting by Jemima Kelly; Editing by Raissa Kasolowsky)
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