For all latest news, follow The Financial Express Google News channel.
The dollar rallied sharply on Tuesday after US President-elect Donald Trump pledged tariffs on all imports from Canada and Mexico, and additional tariffs on China.
Stocks declined, giving back some of the robust gains of the previous session, when they were buoyed by the nomination of fund manager Scott Bessent as Treasury Secretary, considered by investors as a voice for Wall Street in Washington.
Bessent's appointment had also led to a sharp fall in US yields as investors scooped up Treasury bonds, sending the dollar sliding in the previous session, according to a Reuters report.
"It's almost as if Trump wants to remind markets who is in control, after nominating Scott Bessent as Treasury Sec - a man markets expected to cool Trump's potency," said Matt Simpson, senior market analyst at City Index.
"With the Canadian dollar rising against the Mexican peso, markets are assuming this will hit Mexico the hardest."
The dollar jumped 1.6 per cent to 20.6000 Mexican pesos as of 0213 GMT on Tuesday, and climbed 1 per cent to C$1.4132 .
It strengthened 0.2 per cent to 7.2628 yuan in offshore trading, after earlier reaching the highest since late July at 7.2730 yuan.
Australia's risk-sensitive dollar - which also tends to reflect the outlook for top trading partner China - slumped 0.5 per cent to $0.6474, after earlier dipping to $0.64335 for the first time since August 5.
"It was just last month that Trump said that 'the most beautiful word in the dictionary is tariff', so there really should not have been a surprise in Trump's intention, just in the timing of the comments," said Sean Callow, a senior FX analyst at ITC Markets.
"The fall in trade-sensitive currencies makes sense, and should persist near term."
Japan's Nikkei dropped 1.2 per cent, giving back most of Monday's gains, as investors contemplated the risks of tariffs on the nation's many heavyweight exports, particularly automakers. Toyota slid 2 per cent and Nissa tumbled 4 per cent.
Australia's stock benchmark eased 0.46 per cent, a day after rising to a record high. Taiwan's share index lost 0.8 per cent.
However, Hong Kong's Hang Seng added 0.6 per cent, and mainland blue chips rose 0.2 per cent, reversing earlier declines.
Trump said that on his first day in office he would impose a 25 per cent tariff on all products from Mexico and Canada, and an additional 10 per cent tariff on goods from China, citing concerns over illegal immigration and the trade of illicit drugs.
Trump has previously pledged to end China's most-favored-nation trading status and slap tariffs on Chinese imports in excess of 60 per cent.
"It's definitely a shock to the market and weighing on Chinese assets, especially the export sectors," said Gary Ng, senior economist at Natixis.
"But compared to what he imposed on Canada and Mexico, the magnitude (of the Chinese tariff) is not that big, so investors might still want to see what are the follow ups and when/if the 60 per cent promised will actually come through."
US S&P 500 futures pointed 0.1 per cent lower following a 0.3 per cent gain in the cash index overnight.
Pan-European STOXX 50 futures dropped 1 per cent.
The euro slipped 0.4 per cent to $1.0459. Sterling lost 0.34 per cent to $1.2527.
At the same time, the dollar edged down 0.1 per cent to 154.04 yen , after initially strengthening following Trump's tariff remarks.
The dollar-yen pair tends to track long-term US Treasury yields , which ticked up about 2 basis points to 4.2809% in Tokyo, but following a 15 basis-point slide on Monday.
Gold succumbed to the dollar's strength, dipping to a one-week low of $2,604.99.
Bitcoin rose 1 per cent to $94,610, finding its feet following a pullback from last week's record high at $99,830. The token has benefited from speculation of an easier regulatory environment for cryptocurrencies under Trump.
Oil prices extended declines from the previous session as investors took stock of a potential ceasefire between Israel and Hezbollah.
Brent crude futures fell 0.38 per cent to $72.73 a barrel, while US West Texas Intermediate crude futures were at $68.62 a barrel, down 0.46 per cent. Both benchmarks settled down $2 per barrel on Monday.