The Mexican peso pared losses against the U.S. dollar on Wednesday after the White House said President Donald Trump's planned tariffs on steel and aluminum imports might allow exemptions for Canadian and Mexican producers.
The Mexican currency was up 0.14 percent at 18.712 peso per dollar. It improved from 18.9000 peso earlier on Wednesday.
The dollar, meanwhile, held steady on Wednesday, recouping earlier losses tied to the exit of a top economic adviser to U.S. President Donald Trump, which had raised concerns that tensions over a global trade war were entering a heightened phase.
Doubts among traders persist over whether Trump's proposed tariffs on imported steel and aluminum will be enacted, even after the White House signaled they would go into effect following the resignation of Gary Cohn, the director of the National Economic Council. Traders also are looking to gauge the level of possible retaliation from the European Union, Canada, Mexico and other major U.S. trade partners if these stiff levies were to be implemented.
"So far the reaction has been muted," Sireen Harajli, currency strategist at Mizuho in New York, said of the dollar. "(Cohn's) resignation has signaled higher risk of a trade war."
Cohn's departure comes against the backdrop of steps by the Trump administration to assert protectionist policies, including withdrawing the United States from the Trans-Pacific Partnership, instigating a renegotiation of NAFTA and imposing hefty import tariffs on some targeted products.
The dollar and global stock markets initially sagged on the Cohn departure.
The greenback staged a steady recovery during U.S. trading, while Wall Street shares pared initial losses. In afternoon trading, the index that tracks the dollar versus six currencies fell 0.04 percent, to 89.58, rebounding from an earlier low of 89.407.
The dollar's bounce was further stoked by encouraging data on domestic private hiring and labor costs that reinforced the view of underlying strength in the U.S. economy. However, those figures were mitigated by a larger-than-forecast widening of the U.S. trade deficit in January. Nevertheless, anxiety about a deterioration in global trade limited the dollar rebound with some traders favoring the yen as a safe haven, analysts said.
"We therefore see the latest news as an additional reason to remain cautious on the outlook for the broad dollar," Goldman Sachs economists Zach Pandl and Karen Reichgott wrote in a research note.
The dollar was down 0.04 percent at 106.07 . It held just above a 14-month low of 105.23 yen set last week, Reuters data showed.
The euro was last up 0.07 percent, at $1.2412. The trade-weighted euro index hit 100.2565, the highest level since September 2014.