By Kevin Buckland
TOKYO (Reuters) – The dollar drifted slightly lower on Wednesday in indecisive trading as a lack of clarity on President Donald Trump’s plans for tariffs kept financial markets guessing.
Trump said late Tuesday at the White House that his administration was discussing imposing a 10% tariff on goods imported from China on Feb. 1, the same day that he previously said Mexico and Canada would face levies of around 25%.
He also vowed duties on European imports without providing further details.
Despite those threats, a lack of specific plans from Trump’s first day in office saw the dollar start the week with a 1.2% slide against a basket of major peers. It stabilized on Tuesday, ending flat after an attempted rebound fizzled, with U.S. officials saying any new taxes would be imposed in a measured way.
The dollar index, which tracks the currency against the euro, yen and four other top rivals, was down 0.14% at 108 as of 0054 GMT.
The euro slipped 0.07% to $1.0420, while the yen edged up slightly to 155.40 per dollar.
“While Trump threatened tariffs up to 25% on Mexico and Canada, he refrained from enacting them despite signing several executive orders,” said Tony Sycamore, an analyst at IG.
“His decision not to target China is being taken as a possible sign of a more cautious approach to tariffs than promised during his campaign, reducing inflation risks and potential hawkish Federal Reserve actions.”
Traders expect a quarter-point Fed interest rate cut by July, while another reduction by year-end is considered a coin toss.
Elsewhere, expectations have been growing that the Bank of Japan will raise rates by a quarter point on Friday, supporting the yen.
China’s yuan was flat at 7.2735 per dollar in offshore trading, after pushing to the strongest level since Dec. 11 on Tuesday at 7.2530.
“10% tariffs on China imports would be far below the 60% rate he mentioned in his campaign,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“On top of this is the general sense that Trump is not pursuing maximalist trade protectionism in his early actions, but appears to be positioning for trade negotiations,” Tan said.
“Altogether these suggest that the U.S. dollar could drop further.”
The Canadian dollar eased about 0.1% to C$1.4335 per greenback, following a volatile week that saw it tumble as low as C$1.4520 overnight for the first time since March 2020, feeling additional pressure from cooling inflation last month.
The Mexican peso also edged 0.1% lower to 20.6350 per dollar.