The dollar index registers gains after Donald Trump’s order to impose tariffs on Colombia. The attention of the day will be focused on the behavior of the Colombian peso and its impact on other currencies.
The dollar begins the week on the rise after President Donald Trump ordered the imposition of tariffs on Colombia in retaliation for its refusal to receive deported migrants.
He dollar indexwhich compares the greenback with a basket of six prominent currencies, gained 0.1%, to 107.58 units, still close to the one-month low it hit last week. The index has risen almost 4% since the US elections in early November. This rebound occurs after having gone through its worst week in 14 months, driven by the perception of lower tariff activity during Trump’s first week in power.
Trump raised new concerns among traders by announcing a 25% emergency tariff on Colombian products entering the United States, with a projected increase to 50% in the following week. This measure boosted the appreciation of the dollar against most major currencies, as investors assessed the impact of a possible decline in demand for foreign goods on the U.S. market.
Last week was the dollar’s weakest in more than a year on expectations that the tariffs enacted by U.S. President Donald Trump will be lower than expected. Nevertheless, Concerns have resurfaced as the United States and Colombia moved back from the brink of a trade war.
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Investors’ focus remains on the Fed
This week’s monetary policy decisions and Friday’s inflation data suggest the focus may shift, at least temporarily, from tariff risks to interest rate differentials, according to some analysts.
The Federal Reserve is expected to leave rates unchanged and the European Central Bank, Bank of Canada and Riksbank to cut rates by 25 basis points, but markets will closely monitor any clues about the outlook.
How the increase in tariffs can impact the Colombian peso
The economist Juan Nicolás Garzón, professor of Law and Political Sciences at the University of La Sabana, pointed out that the measure announced by Trump will have two immediate and significant economic repercussions.
First of all, the tariffs imposed on Colombian products will considerably reduce exports to the United StatesColombia’s main trading partner. This decrease in exports will impact the dynamics of supply and demand for dollars in the Colombian economy, since Payments for exports are made in this currency, which could result in an increase in the value of the dollar against the Colombian peso.
In second placethe deterioration in diplomatic relations between both countries could generate an environment of uncertainty that discourages foreign investment. American companies could be less willing to invest in Colombia, which would reduce the entry of dollars into the country and It would further affect the value of the local currency.
Source: Ambito
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