Investing.com -- The dollar was mixed in early trading in Europe on Monday, trading lower against haven currencies and higher against proxies for risk appetite in the wake of President Donald Trump’s threats to impose fresh tariffs on Chinese imports.
The euro had fallen just under half a cent late on Sunday after Trump threatened to raise existing tariffs on $200 billion of Chinese imports from 10% to 25%, and to levy new tariffs of 25% on a further $325 billion so far unaffected by the U.S.-China trade dispute.
However, as of 3:00 AM ET (0700 GMT), the euro had recouped most of its initial losses to trade at $1.1193. Trade is set to be relatively quiet Monday due to the public holiday in the U.K. The main data event of the day will be service PMIs from across the region.
"The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!” Trump said via Twitter.
Analysts said the move appeared to aim at putting pressure on China during what was supposed to be the final stages of trade talks between the two countries. Chinese officials have said in the past they won’t negotiate with a gun to their heads.
The yuan and Chinese stocks both fell on the news. The dollar rose to a four-month high against the yuan and had risen 0.7% to 6.7802 by the close in Shanghai.
The Chinese central bank responded by cutting reserve requirements for small and medium-sized banks, a measure that it said would release 280 billion yuan of liquidity.
The dollar had also fallen to a six-week low of 110.30 yen after Trump's comments, and also dipped against the Swiss franc, the two currencies that traditionally attract strong bids at time of higher volatility. At 3 AM ET, it was at 1.0156 francs, down 0.1% from late Sunday.
The dollar index, which measures the greenback against a basket of six major currencies, was at 97.312. Analysts at ING said they expect the dollar to remain well bid this week, with the possibility of interest rate cuts from central banks in Australia and New Zealand, Malaysia, Thailand and the Philippines.
The risk-off tone across Asia also put renewed pressure on the Turkish lira, which breached 6 to the dollar in early trading for the first time since September.
Elsewhere, the British pound weakened slightly as hopes of a cross-party deal to break the impasse on Brexit faded. By 3 AM ET, the pound was down 0.4% at $1.3124.