Written by Ray Wee and Harry Robertson

SINGAPORE/LONDON (Reuters) – The dollar rebounded strongly on Tuesday after falling hours earlier as Donald Trump’s first day back in office brought mixed messages on tariffs and highlighted investors’ sensitivity to trade policy headlines.

US stock futures rose after rebounding on Monday as traders digested Trump’s comments on economic policy and trade tariffs, while European stocks posted small gains.

The Mexican peso and Canadian dollar fell Monday night — giving up sharp gains made earlier in the day — after Trump said he was considering imposing 25% tariffs on neighboring countries as soon as February 1.

This caused the Mexican peso to fall by 1.3% against the US dollar, while the Canadian dollar fell to a five-year low of US$0.689.

About 11 hours ago, the US dollar fell against its counterparts after a presidential memo, first reported by the Wall Street Journal, said the administration would investigate trade issues but would stop short of tariffs on the first day.

The index, which measures the currency against six peers, rose 0.64% to 108.69 on Tuesday, although it failed to make up the 1.2% it lost on Monday in its biggest daily decline since November 2023.

“The first few hours of the Trump administration have confirmed that the policy environment will be dynamic again and markets should brace for volatility,” said Charu Chanana, chief investment strategist at Saxo Bank.

“Markets clearly celebrated very early with no tariff threats initially made in Trump’s inauguration speech.”

The euro fell in recent trading by 0.62% to $1.2248, after rising 1.4% on Monday amid relief about the delay in imposing customs duties. The British pound fell by 0.67% after jumping by 1.3% the previous day.

Trump has also said he wants to reverse the US trade deficit with the European Union, either through tariffs or more energy exports.

The continental European index rose by 0.16% but fell by 0.1%.

US stock futures rose after difficulties in early trading, leaving Nasdaq futures up 0.56% and 0.49%.

European automakers fell about 0.4 percent on Tuesday after Trump rescinded a 2021 executive order signed by his predecessor that sought to ensure that half of all new cars sold in the United States by 2030 were electric.

Trump storm

The dollar has risen about five percent since Trump won the November 5 election, partly because the US economy has remained strong and partly because investors are preparing for broad tariffs that are likely to hurt America’s trading partners.

Many investors had expected early action on tariffs, so the big moves sparked by the memo suggest no immediate action will be taken.

US Treasury yields fell by 4 basis points on Tuesday to 4.57%, after they reopened for trading after a public holiday.

However, yields, which set the pace for borrowing costs around the world, have risen by about a percentage point since the Fed cut interest rates by 50 basis points in September, reflecting an economy that has continued to grow strongly.

Chinese stocks were volatile but ended higher as Trump largely steered clear of eventual threats against the country’s exports, with the CSI 300 rising 0.1%.

Trump warned that he may impose tariffs on China if Beijing fails to agree to a US deal to be half the owner of the short video application TikTok.

“At some point, we are quite certain that Trump will start moving on tariff measures,” Khun Goh, head of Asia research at ANZ Bank, said of broader tariffs.

“The fact that he didn’t address this on day one doesn’t mean it’s off the agenda. It’s definitely on the agenda, we just have to wait and see what shape or form it takes.”

Elsewhere, Trump’s new cryptocurrency gave up some of its strong gains on Tuesday to fall 20% to $35.27, after its market value soared to more than $10 billion at the start of the week.