Written by Wayne Cole
SYDNEY (Reuters) – The dollar posted heavy losses on Tuesday after U.S. President Donald Trump failed to introduce new tariffs and reports suggested any new taxes would be imposed in a “measured” manner, a major relief for trade-exposed currencies.
Trump used his inaugural address to announce immigration and energy emergencies and an expansionist foreign policy, including a promise to restore the Panama Canal.
However, the tariffs have only been briefly mentioned and, so far, there are no details on how or when they might be introduced.
“It doesn’t mean tariffs won’t be imposed, but it’s taken as an indication towards gradualism and against universality,” said Taylor Nugent, senior markets economist at National Australia Bank (OTC:).
Markets reacted quickly, with a 1.2% drop on Monday in its biggest daily loss since late 2023. The index was last at 108.060, just above support around 107.70.
The euro rose to $1.0416, after gaining 1.4% overnight to test resistance at $1.0435. The EU has a significant trade surplus with the United States and is seen as the main target of Trump’s tariffs.
Likewise, Trump has threatened China with tariffs of up to 60%, so the absence of any firm numbers sent the dollar down 1.0% to 7.2642 yuan in offshore trade on Monday.
The Australian and New Zealand dollars, both open countries that rely heavily on trade, saw gains of around 1.5%.
The dollar fared relatively better against the Japanese yen at 155.63 after falling just 0.4% overnight.
The yen strengthened last week on growing expectations that the Bank of Japan will raise rates at its meeting this Friday.
There was limited initial reaction in US bond markets, partly due to the Martin Luther King Jr. holiday. and fears that a combination of tariffs, immigration restrictions and tax cuts could lead to a rebound in inflation.
Markets still aren’t expecting another rate cut by the Federal Reserve until June or July, with a cut of about 40 basis points implied by the end of the year.
Yields on the 10-year Treasury bond looked likely to fall from 4.623% when trade resumed in Tokyo, with futures implied to open at 4.59%.
“Markets will have a huge amount to digest this week, but if the implementation of trade and immigration policies does not negatively disrupt supply chains and the workforce, financial markets may ease some of their recent inflation caution,” ANZ analysts wrote. in the note.
Trump’s support for cryptocurrencies helped bitcoin hit a record high of $109,071.86 on Monday, before easing slightly to $103,791.
