By Samuel Indyk and Brigid Riley
LONDON (Reuters) -The U.S. dollar firmed for a second day on Thursday, but was still close to an 11-week trough as vague pledges from U.S. President Donald Trump to impose tariffs on Europe and further delay levies planned for Canada and Mexico stoked uncertainty.
The euro edged further back from a one-month high of $1.0529 hit in the previous session, as traders took a wait-and-see approach to Trump floating the idea on Wednesday of a 25% “reciprocal” tariff on European cars and other goods.
Trump also said steep 25% tariffs on Mexican and Canadian goods could take effect on April 2 instead of the previously stated deadline of March 4.
But a White House official said levies on Mexican and Canadian goods remained in effect “as of this moment”, pending Trump’s review of both nations’ actions to secure their borders and halt the flow of migrants and the opioid fentanyl into the United States.
“It fits pretty well with our predisposition that Trump is over-threatening with tariffs but under-delivering,” said Mohamad Al-Saraf, senior analyst at Danske Bank.
“Sure, the dollar is a bit stronger, but it’s not like the first few weeks after the Trump inauguration where tariff headlines had a much bigger impact than they have now.”
The mixed messages from the Trump administration kept currencies largely within recent ranges.
The euro dropped 0.1% to $1.0479, with investors also awaiting news of any progress on efforts by German conservatives to form a coalition government after their weekend election victory.
The Canadian dollar was steady but near a two-week low against its U.S. counterpart reached the day before, while the Mexican peso was little changed at 20.423 per dollar.
TRADE CONCERNS
While global trade concerns helped lift the dollar index to 106.6, further away from a more-than-two-month low of 106.12 touched on Monday, it remained down nearly 4% from a more-than-two-year high hit in January as the shifting tariff messages simultaneously fanned worries about U.S. economic growth and inflation.
A recent string of indicators, including weak U.S. business activity in February, and a sharp drop in consumer confidence, amplified those concerns, causing U.S. Treasury yields to tumble.
While hard economic data has yet to show the decline that sentiment indicators have, risks are growing, Commerzbank economists Bernd Weidensteiner and Christoph Balz wrote in a research note.
“So far, we see no reason to abandon our baseline scenario of continued solid growth; the U.S. economy still appears to have sufficient momentum. However, the real economic data for the coming months should be followed with great attention,” they said.
Money market traders expect the U.S. Federal Reserve will deliver at least two rate cuts this year, with about 58 basis points of easing priced in for 2025, although the next cut is not fully priced until July.
The Australian and New Zealand dollars, both particularly vulnerable to the risks of a global trade war, brushed their lowest levels in two weeks.
The U.S. dollar was last up 0.4% at 149.68 yen, but remained not far off its weakest level against the Japanese currency since early December.
The fall in U.S. Treasury yields has helped to lift the yen, while Japanese yields have also climbed on bets that the Bank of Japan will continue to raise interest rates this year.
Japan’s top currency diplomat, Atsushi Mimura, on Wednesday underscored Tokyo’s view that the yen’s rebound was broadly in line with an improving economy that could justify BOJ hikes.
In cryptocurrencies, bitcoin rose 2.2% to $86,320 after slumping to its lowest level since November 11 at $82,156.99 the previous day.
(Reporting by Samuel Indyk and Brigid Riley; Editing by Shri Navaratnam, Sam Holmes, Kevin Liffey and Alex Richardson)
