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Dollar falls amid U.S. growth worries

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Trump's 25% tariffs on Mexico and Canada take effect

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U.S. companies cite tariff concerns in survey

(Adds later details)

By Harry Robertson and Ankur Banerjee

LONDON/SINGAPORE, March 4 (Reuters) -

The dollar fell to a three-month low on Tuesday as concerns

about slowing growth and the impact from tariffs on the U.S.

economy outweighed any potential boost from the

ramping up of levies

on Canada, Mexico and China.

President Donald Trump's new 25% tariffs on goods from

Mexico and Canada took effect, along with a doubling of duties

on Chinese goods to 20%, at 12:01 a.m. EST (0501 GMT).

In response, China said it will impose additional tariffs of

10-15% on certain U.S. imports from March 10. Canada has said

that retaliatory tariffs on the United States would take effect

on Tuesday and Mexico is expected to follow suit.

Worries of a trade war and the hit to other countries'

economies might be expected to boost the U.S. dollar, but recent

weak economic data has weighed on the currency and bond yields

in the United States.

Concerns about duties on imports dominated commentary from

manufacturers in the weak Institute for Supply Management survey

on Monday, which continued a run of tepid data.

The U.S. dollar index, which tracks the currency

against six peers, fell 0.54% to 105.96, its lowest since

December.

"While the U.S. is now broadening its tariff regime to

Canada and Mexico, weak domestic U.S. activity... is preventing

the dollar from strengthening on the tariff news," said Chris

Turner, global head of markets at ING.

Investors flocked to traditional safe-haven currencies

the Japanese yen and Swiss franc, which were

both up almost 1%, as growth and tariff fears knocked

global stocks

on Tuesday.

The Canadian dollar was around 0.45% stronger at

1.4471 per U.S. dollar, having hit a one-month low of 1.4542

late on Monday as tariffs were confirmed.

The Mexican peso was last down roughly 0.3% at 20.76

per dollar, after earlier touching its lowest since February 3.

Analysts said many in the market were hoping tariffs might

quickly be lifted if deals can be struck, much as the initial

threat of levies against Canada and Mexico was halted in

February.

"The size of initial moves lower for the Canadian dollar and

Mexican peso has been relatively modest considering the scale of

the tariffs that have been put in place," said Lee Hardman,

senior currency analyst at Japanese bank MUFG.

"The price action suggests that market participants remain

hopeful that the tariff hikes won't remain in place for long

helping to limit trade and economic disruption."

EURO, STERLING, YEN RALLY

The euro perked up, reflecting the lack of tariffs

on the European Union and a sharp narrowing of the gap between

U.S. and euro zone bond yields, which has made the dollar less

attractive.

It climbed to its highest since December at $1.0547, up

0.5%.

Euro zone government bond yields have risen

relative to those in the United States as Trump's pullback from

supporting Ukraine has stirred expectations of higher borrowing

and spending on defence. Yields move inversely to prices.

Investors are also keeping an eye out for the European

Central Bank policy meeting on Thursday, with traders pricing in

another 25 basis-point cut.

U.S. 10-year Treasury yields fell to their

lowest level since October on Tuesday at 4.115% as traders

digested the weak data and tariff headlines.

Sterling rose to an 11-week high of $1.2744 as the

dollar slipped and was last up 0.3%.

Trump said on Monday he told leaders of Japan and China they

cannot continue to reduce the value of their currencies as doing

so would be unfair to the United States.

The dollar fell 0.9% against the yen to

148.17, its lowest since October.

Speculators last week mounted their

biggest ever wager

that the yen will continue to rise as they position for

further Bank of Japan interest rate hikes.

China's yuan rose around 0.3% to 7.265 per

dollar, aided by the central bank continuing a strengthening

bias in its daily official guidance.