*

Trump tariff threats on Mexico, Canada hammer currencies

*

Investors skittish over further policy rollouts

*

U.S. futures gain, European stocks tick higher

(Updates with morning European trading)

By Rae Wee and Harry Robertson

SINGAPORE/LONDON, Jan 21 (Reuters) - The dollar

rebounded sharply on Tuesday after plunging hours earlier as

Donald Trump's first day back in the U.S. presidency brought

mixed messaging on tariffs and highlighted investors'

sensitivity to headlines about trade policy.

U.S. stock futures rose after bouncing around on Monday as

traders digested Trump's statements on economic policy and trade

levies, while European equities eked out small gains.

The Mexican peso and Canadian dollar tumbled on Monday night

- reversing sharp gains from earlier in the day - after Trump

said he was mulling imposing 25% tariffs on the neighbouring

countries as soon as Feb. 1.

That sent the Mexican peso sliding 1.3% against the U.S.

dollar while the Canadian dollar tumbled to a five-year low of

$0.689 .

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

its peers after a presidential memo, first reported by the Wall

Street Journal, said the administration would probe trade issues

but stop short of day-one tariffs.

The dollar index, which measures the currency against

six peers, was last up 0.64% at 108.69 on Tuesday, although

failed to make back the 1.2% it lost on Monday in its biggest

daily fall since November 2023.

"The first few hours of the Trump administration have

underscored that the policy environment will be dynamic once

again and markets should brace for volatility," said Charu

Chanana, Saxo's chief investment strategist.

"Clearly, the markets celebrated too soon with tariff

threats missing at the outset in Trump's inaugural speech."

The euro was last down 0.62% at $1.2248, after

rallying 1.4% on Monday amid the relief about a delay in

tariffs. Sterling was 0.67% lower after jumping 1.3%

the previous day.

Trump also said he wanted to reverse the U.S. trade deficit

with the European Union, either with tariffs or more energy

exports.

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

higher but Germany's DAX was down 0.1%.

U.S. stock futures rallied after struggling in early

trading, leaving Nasdaq futures 0.56% higher and S&P 500

futures up 0.49%.

European carmakers slipped around 0.4% on Tuesday

after Trump revoked a 2021 executive order signed by his

predecessor that sought to ensure half of all new vehicles sold

in the United States by 2030 were electric.

TRUMP TEMPEST

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

election, partly because the U.S. economy has remained strong

and partly as investors have braced for wide-ranging tariffs

that would likely hurt America's trading partners.

Many investors had expected early action on tariffs, hence

the big moves sparked by the memo indicating no immediate

action.

U.S. Treasury yields were down 4 basis points on

Tuesday at 4.57%, after reopening for trading after a public

holiday.

The yields, which set the tone for borrowing costs around

the world, are nonetheless up almost a percentage point since

the Federal Reserve slashed rates by 50 bps in September,

reflecting an economy that has continued to grow strongly.

Chinese stocks were volatile but ended higher as Trump

largely steered clear of definitive threats against the

country's exports, with the CSI 300 index up 0.1%.

Trump warned he could impose tariffs on China if Beijing

failed to approve a U.S. deal to be a half-owner of short-video

app TikTok.

"At some point, we are quite certain that Trump will start

to move on the tariff measures," Khoon Goh, head of Asia

research at ANZ, said of tariffs more broadly.

"The fact that he hasn't addressed this on day one doesn't

mean that it is off the agenda. It is definitely firmly on the

agenda, it's just that we have to wait and see what shape or

form he takes."

Elsewhere, Trump's new crypto token gave up some of its

strong gains on Tuesday to fall 20% to $35.27, after having

soared to more than $10 billion in market value at the start of

the week.