The Mexican peso surged 2 percent versus the dollar on Monday after the United States and Mexico agreed on a migration to stop a trade tariff war.
Over the previous years, trade spats between U.S. and other trading partners, including China have slowed economic growth and unsolved financial markets.
Trump had previously said he imposes 5 percent imports tariffs on all Mexican goods starting on Monday if Mexico did not commit to do more to tighten its borders.
“We all knew that Donald Trump was unpredictable, but this was taking it to a whole new level,” said Chris Weston, Melbourne-based head of research at foreign exchange brokerage Pepperstone.
“This was political, it was social. It meant that financial markets had to wear a higher risk premium.”
The USD/MXN pair slipped 2.0 percent to 19.2234 following the reports.
The yen tumbled 0.3 percent versus the dollar to 108.50 after previous hitting its feeblest since late May, though it stays 3.3 percent stronger than its level of April. The currency usually gains in geopolitical or financial stress.
Bart Wakabayashi, Tokyo branch manager at State Street Bank said, “The lift to sentiment from the U.S.-Mexico deal would “probably spill over to optimism with China and hopefully some progress there.”
“We’ve had trade talks with the EU, with Japan. Hopefully these will start to turn to the positive narrative,” he said.
The dollar’s gains were checked by escalating anticipations the U.S. Federal Reserve will cut interest rate. Analysts were now anticipating a cut before the data came out, as intensifying trade disputes between United States and China escalated worries of slowing economic growth.
Non-farm payroll created 75,000 jobs last month, much fewer than expected while wage inflation eased, the Labor Department reported.
Federal Reserve Chairman Jerome Powell signaled a week ago that the central bank would “act as appropriate to sustain the economic expansion.”
“The U.S. will go forward with our plan to impose more tariffs if discussions with China do not go well.” U.S. Treasury Secretary Steven Mnuchin said
The USD/CNY pair surged 0.4 percent to 6.9334 even after data showed China’s general trade surplus in May was significantly above expected.
In a June 8 note, Goldman Sachs said it expects the yuan to wither past 7 per dollar in the next three months because of higher U.S. tariffs, a news agency quoted.
The investment bank said the effective capital controls will limit the yuan’s decline.
The Australian dollar was down 0.4 percent to $0.69.73.
The NZD/USD pair tumbled 0.4 percent