The dollar was little changed on Wednesday against a basket of currencies as traders await details on U.S. President Donald Trump’s proposed tariffs on steel and aluminum, which have touched off fears of a global trade war.
The White House said late Wednesday that Canada, Mexico and possibly other countries may be exempted from the tariffs on the basis of national security. The dollar pared gains in late U.S. trading following that news, while the Canadian dollar and Mexican peso trimmed their losses versus the greenback.
The dollar was weaker earlier in the day following the resignation of Trump’s top economic adviser, Gary Cohn, who was regarded as a bulwark of economic orthodoxy and had told Trump that markets would slump on a tariffs threat.
“So far the reaction has been muted,” Sireen Harajli, currency strategist at Mizuho in New York, said of the dollar. Cohn’s “resignation has signaled higher risk of a trade war.”
Cohn’s departure comes against the backdrop of steps by the Trump administration to assert protectionist policies, including withdrawing the United States from the Trans-Pacific Partnership, instigating a renegotiation of the North American Free Trade Agreement and imposing hefty import tariffs on some targeted products.
Nevertheless, doubts among traders have persisted about how broadly Trump would apply this protectionist move, if at all.
A White House official said Trump hopes to sign the tariffs on Thursday afternoon.
The index that tracks the dollar versus six currencies fell 0.042 points or 0.05 percent, to 89.576
The dollar’s bounce was stoked by data on domestic private hiring and labor costs that reinforced the view of underlying strength in the U.S. economy. However, those figures were mitigated by a larger-than-forecast widening of the U.S. trade deficit in January.
The Federal Reserve in its Beige Book of regional econmic conditions suggested the U.S. expansion has continued with signs of wage growth accelerating since mid-January.
But anxiety about a deterioration in global trade limited the dollar rebound with some traders favoring the yen as a safe haven, analysts said.
“We therefore see the latest news as an additional reason to remain cautious on the outlook for the broad dollar,” Goldman Sachs economists Zach Pandl and Karen Reichgott wrote in a research note.
Against the yen, the dollar was down 0.06 percent, at 106.05 yen. It held just above a 14-month low of 105.23 yen set last week, Reuters data showed.
Ahead of an European Central Bank policy meeting on Thursday, the euro was last up 0.07 percent, at $1.2411
The trade-weighted euro index hit 100.2565, the highest level since September 2014.