The Mexican peso has been under pressure against the US dollar following Donald Trump’s statement that he will impose strict tariffs on imports from Mexico. This comes as most Asian markets saw a slight increase on Friday, bringing an end to a volatile week.
The turbulence began after China’s DeepSeek unveiled a new and innovative chatbot, but the situation worsened when Trump confirmed that he would impose hefty tariffs on both Canada and Mexico.
Markets were shaken by the news that DeepSeek, a Chinese startup, had developed a program that seems to rival the capabilities of US artificial intelligence companies, but at a much lower cost.
This development has raised questions about the large investments that have been made in the AI sector by leading American companies, especially since some, like Nvidia, saw their stock prices drop sharply by almost 17 percent on Monday and have yet to recover.
Additionally, mixed results from major tech firms like Microsoft and Meta over the past few days have failed to generate much enthusiasm. On a brighter note, Apple’s announcement of a $124.3 billion profit for the fourth quarter was welcomed by investors.
Several industry leaders have expressed their support for DeepSeek’s entry into the market, noting that competition can be beneficial. Analysts have pointed out that the situation could lead to healthier growth in the sector.
Eric Compton from Morningstar highlighted that this development could mirror the PC revolution, where computing power became affordable for many people.
“The idea that AI would remain expensive and dominate the world is unlikely. The advancements made by DeepSeek are encouraging and healthy for the ecosystem,” he said.
Meanwhile, despite the sell-off in Japanese chipmakers that had benefited from the AI surge, South Korean companies also experienced losses as markets reopened in Seoul after a holiday.
Shares of SK hynix dropped nearly 12 percent, while Samsung saw a loss of over 2 percent, with the company also reporting a decline in operating profits in the last quarter of 2023 due to struggles in meeting the demand for chips used in AI servers.
In contrast, markets in Tokyo, Sydney, Singapore, Wellington, Manila, and Jakarta showed positive results. However, Shanghai, Hong Kong, and Taipei remained closed for the Lunar New Year celebrations.
Gold prices remained near the record high of $2,799.65 reached earlier in the week, driven by uncertainties about the global economy and Trump’s trade policies.
As the US dollar gained strength, the Mexican peso and Canadian dollar were particularly affected by Trump’s announcement about the 25 percent tariffs, which are set to go into effect on Saturday.
Trump has accused Mexico and Canada of not doing enough to combat illegal immigration and drug trafficking, but it remains unclear whether oil imports will be impacted.
In 2023, the two countries supplied over 71 percent of the US’s crude oil imports.
China is another country that could face tariffs, though Trump’s rhetoric has been more measured compared to his earlier campaign promises, where he suggested imposing tariffs as high as 60 percent.
Since taking office on January 20, he has indicated that a tariff rate of around 10 percent might be more likely.
The Japanese yen managed to hold steady after Ryozo Himino, Deputy Governor of the Bank of Japan, stated that the central bank would continue to raise interest rates throughout this year.
Additionally, recent data showed that core consumer prices in Tokyo had risen at their fastest rate since February, further supporting the yen.
Here are some key figures from the markets:
- Tokyo’s Nikkei 225 Index rose by 0.1 percent to 39,540.37.
- Hong Kong’s Hang Seng Index was closed for the holiday.
- Shanghai’s Composite Index was also closed for the holiday.
- The Euro was slightly up at $1.0394, compared to $1.0392 the previous day.
- The Pound was slightly up at $1.2424, compared to $1.2420.
- The Dollar dropped to 154.00 yen from 154.38 yen.
- The Euro/Pound exchange rate decreased to 83.65 pence from 83.67 pence.
- West Texas Intermediate crude oil rose 0.4 percent to $73.01 per barrel.
- Brent North Sea Crude increased by 0.4 percent to $77.14 per barrel.
- In the US, the Dow Jones Industrial Average gained 0.4 percent, closing at 44,882.13.
- The London FTSE 100 Index climbed 1.0 percent to 8,646.88.
This week’s market performance has been heavily influenced by a combination of political and economic developments, as well as the surprising emergence of competition in the AI industry.
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