The Canadian dollar, Mexican peso, and euro remained stable against the U.S. dollar on Tuesday, following significant rebounds on Monday after U.S. President Donald Trump announced a one-month suspension of tariffs on Canada and Mexico.
The Chinese yuan also showed strength in offshore trading after recovering from a record low. Optimism about a potential agreement to prevent the imposition of 10% tariffs on Chinese goods, set to take effect on Tuesday, helped bolster market sentiment.
The Australian dollar, often seen as a proxy for the yuan, was stable after bouncing back from a nearly five-year low.
In response to the tariff delays, Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum announced agreements to enhance border enforcement efforts, particularly aimed at addressing immigration and drug smuggling. This cooperation was part of the effort to delay the 25% tariffs scheduled for implementation on Tuesday, which will now be postponed for 30 days.
This development alleviates immediate concerns about a potential trade war, which economists had warned could harm the economies of the affected countries and lead to higher consumer prices.
Despite the short-term improvement in market sentiment, analysts cautioned that trade uncertainties could resurface if no substantial progress is made toward a lasting agreement by the end of the month. As a result, markets are expected to continue factoring in a risk premium linked to trade-related disruptions.
The U.S. dollar remained flat against the Canadian dollar at C$1.4435, following a 0.85% retreat on Monday. The U.S. dollar also saw slight increases against the Mexican peso, reaching 20.3939 pesos after a 1.7% drop the previous day.
Meanwhile, the U.S. dollar rose 0.15% against the Chinese yuan in offshore trading, stabilizing after reaching a record high of 7.3765 yuan. Yuan trading remained closed until Wednesday due to the ongoing Lunar New Year holidays in mainland China.
The euro experienced a slight decline to $1.0323, while the British pound edged down to $1.2427 after a brief rise in the previous session.
Elsewhere, the U.S. dollar gained 0.4% against the Japanese yen, with reduced demand for the safe-haven currency amid shifting trade dynamics.
Bitcoin, the popular cryptocurrency, remained steady at $101,454 after rebounding from a session low of $91,439.
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