Dollar Recovers on Hope of U.S. Tariffs Exclusions

On Thursday, the dollar has recovered its ground as it draws relief from a positive labor market data. Meanwhile, the White House stated that Canada, Mexico, and some other countries, might be exempted from the U.S. tariffs on aluminum and steel.

In another place, the Euro trod water ahead of the meeting of European Central Bank, which is expected to leave the policy rates unchanged, but may provide some clues to the future.

Meanwhile, the dollar had weakened after the resignation of Gary Cohn, the economic advisor of U.S. President Donald Trump, on Tuesday.

His exit had sparked concerns of a potential global trade war if Trump pushed through with proposals for tariffs on all steel and aluminum imports.

The recovery of the dollar was fueled by the data on U.S. private hiring and labors costs that reinforced the view of underlying strength in the economy.

The U.S. currency, on the other hand, was firm at 106.040 yen after falling to as low as 105.450 the other day in response to the departure of Cohn.

The dollar index against a basket of six major currencies was flat at 89.585 after pulling away from a two-week trough of 89.407.

“The market has managed to digest Cohn's resignation,” Junichi Ishikawa, a senior FX strategist, stated. “That said, 'Trump risk,' which are developments associated with the U.S. president and his circle, will continue to impact the market as one of the main themes of 2018.”

While the concerns about U.S. tariffs may have lessened, but the recovery of the dollar was limited as fears of trade struggles lingered with Trump sticking to a protectionist stance in the longer run.

Meanwhile, the chief market economist at Mizuho Bank, Daisuke Karakama, stated that while the currency market is hard to forecast, the dollar “will almost certainly weaken” if that is what the U.S. wants to happen.

“Along with tariffs, weakening your own currency becomes a weapon in a trade war,” Karakama stated.

On the other hand, the euro was little changed at $1.2408 after retracing a bounce on Wednesday to a 2-1/2-week peak of $1.2447.

The Canadian dollar was 0.2 percent stable at C$1.2881 per dollar, having weakened to C$1.3002 on Wednesday. However, it is now recovering on the prospect that the tariffs of Trump may exempt Canada and Mexico.

On Wednesday, the Mexican currency was at 18.68 pesos per dollar following its recovery from 18.90.

Meanwhile, the Australian and New Zealand dollars increased 0.1 percent at $0.7833 and $0.7292 respectively.

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