LONDON/SINGAPORE, Nov 26 (Reuters) - The Canadian dollar

and Mexican peso slumped on Tuesday after President-elect Donald

Trump said he would impose tariffs on products from Canada,

Mexico and China, sparking volatility as investors braced for

trade spats.

In an initial knee-jerk reaction to Trump's comments, the

dollar jumped more than 2% against the peso but was last

up 0.95% after the moves moderated.

The dollar hit a 4-1/2-year high against its Canadian

counterpart, rising more than 1.5%, and was last up

0.78% at C$1.4095. The U.S. currency also rose to its highest

since July 30 against China's yuan .

The greenback had spent the previous couple of days on the back

foot as U.S. Treasury markets cheered Trump's pick of hedge fund

manager Scott Bessent as U.S. Treasury Secretary, causing

government bonds to rally and yields to fall, weighing on the

currency.

Yet Trump halted that momentum when he said that on his

first day in office, he would impose a 25% tariff on all

products from Mexico and Canada.

On China, the president-elect said Beijing was not taking

strong enough action to curb the export of ingredients used in

illicit drugs, floating "an additional 10% tariff, above any

additional tariffs, on all of their many products coming into

the United States of America".

"I think we had a perfect example last night of why

volatility is more likely under Trump," said Jane Foley, head of

FX strategy at Rabobank.

"He can just put out a comment like that outside of usual

U.S. market hours that takes people by surprise. It leaves

investors, everybody scrambling to work out what this really

means."

Currencies bounced around as markets digested Trump's

comments, with the euro falling around 0.3% before

rebounding to trade the same amount higher at $1.0526.

The Japanese yen rallied as U.S. traders came in

for the day, with the dollar last down 0.65% at 153.15 yen.

Erik Nelson, macro strategist at Wells Fargo, said some

investors may have been buying the euro to close their previous

bets against the euro-Canadian dollar currency pair, which some

had seen as a "Trump trade" in the belief Europe would be hit

harder by tariffs than Canada.

The rally in the yen puzzled analysts although Neil Jones,

managing director for FX sales and trading at TJM Europe, said

some investors were likely rebalancing their portfolios before

the end of the month, which could accentuate moves.

Ben Bennett, Asia-Pacific investment strategist at Legal And

General Investment Management, said investors have so far

focused on market-positive Trump policies like tax cuts and

deregulation, but that it is arguably quicker for him to

implement more challenging policies such as higher tariffs.

"This announcement serves as a wake up call," he said.

"Tariffs should be good for the U.S. dollar and bad for

currencies that are being tariffed as trade balances shift, but

I'm not sure Trump's government will be happy to let that trade

accelerate."

The Australian dollar sank to a more than

three-month low of $0.6434 in early Asian trading but was last

down just 0.1% at $0.65. The Aussie is often sold as a liquid

proxy for the yuan given China is Australia's biggest trading

partner.

In cryptocurrencies, bitcoin was trading at $92,711,

well below the record high of $99,830 it touched last week.

Bitcoin met profit-taking ahead of the symbolic $100,000

barrier, having climbed more than 40% since the U.S. election on

expectations Trump will loosen the regulatory environment for

cryptocurrencies.