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Dollar soars against Mexican peso and Canadian dollar

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US stocks rise after Trump avoids day-one tariffs

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Markets remain on edge about trade levies

By Harry Robertson

LONDON, Jan 21 (Reuters) - The dollar rallied on Tuesday

after plunging the previous day and stocks rose as Donald

Trump's return to the White House brought mixed messaging on

tariffs and highlighted markets' twitchiness about trade policy.

The Canadian dollar and Mexican peso bore the brunt of the

market swings on Tuesday and Monday, after Trump said he was

mulling imposing 25% tariffs on the neighbouring countries as

soon as Feb. 1.

That sent the Mexican peso sliding well over 1% against the

U.S. dollar while the Canadian dollar tumbled to a five-year low

of $0.689, although the selloff later moderated somewhat

.

Around 11 hours earlier the U.S. dollar had plunged against

its peers - including the Canadian dollar and peso - after a

presidential memo said the administration would probe trade

issues but stop short of day-one tariffs.

U.S. stocks climbed in early trading as markets reopened

after Monday's public holiday, with the S&P 500 index up

0.47%, the Nasdaq rising 0.45% and the Dow Jones

gaining 0.44%.

U.S. equities were likely reflecting relief among investors

that Trump has not kicked off his second presidency with a raft

of trade actions, as they reopened after a public holiday, said

Jan Von Gerich, chief strategist at lender Nordea.

"We shouldn't get too carried away by this, the fact that he

didn't start with tariffs doesn't mean that they won't come

later," he said. "For the global equity market, I think it's all

about Trump now."

European shares were muted after Asia eked out small gains

overnight, with investors and governments breathing a sigh of

relief that Trump avoided clear moves on tariffs on the European

Union and China.

Europe's continent-wide STOXX 600 index was 0.16%

higher and Germany's DAX was up 0.08%.

The dollar index, which measures the currency against

six peers, was last up 0.3% at 108.31 on Tuesday.

It had earlier risen to 108.79 although failed to make back

the 1.2% it lost on Monday in its biggest daily fall since

November 2023.

The euro fell 0.26% to $1.039, after jumping 1.42%

a day earlier.

BOND YIELDS DIP AS CHINA HANGS ON

Many investors and foreign capitals had expected tariffs to

be among the raft of executive orders Trump signed in his first

day in office.

The dollar has risen around 5% since Trump won the Nov. 5

election, partly as investors have braced for wide-ranging

levies that would likely hurt America's trading partners.

U.S. 10-year Treasury yields were down 4 basis

points on Tuesday at 4.57%.

They were nonetheless still up around a percentage point

since the Federal Reserve started cutting rates in

mid-September, reflecting a strong economy and dwindling

prospects for large Fed reductions this year.

Chinese stocks ended higher as Trump largely steered clear

of definitive threats against the country's exports, although he

warned he could impose tariffs if Beijing failed to approve a

U.S. deal to be a half-owner of short-video app TikTok's U.S.

business.

"It's part of a transactional methodology," said Timothy

Graf, head of macro strategy for EMEA at State Street.

"It's better news than just slapping 60% or 100% tariffs on

something, but something is going to be coming, I would think."

China's CSI 300 index rose 0.08% overnight while

Japan's Nikkei 225 climbed 0.32%.

Oil prices fell on Tuesday as investors assessed Trump's

plans to boost U.S. energy production, as well as the delay on

tariffs.

Brent crude was down 1.8% at $78.76 a barrel, while

U.S. WTI crude was 2.73% lower at $75.75 a barrel.