Ankur Banerjee
SINGAPORE (Reuters) – The dollar hovered near its highest level in more than two years at the start of a key week on Monday as Donald Trump re-enters the White House with an inaugural speech that will be the main focus of investors hoping to decipher his immediate policies.
The Japanese yen rose slightly on Monday, holding on to last week’s one-month high, as traders bet the Bank of Japan will raise its benchmark interest rate this week. However, trading is likely to be light with US markets closed.
Investors are also watching developments in the Middle East after Hamas freed three Israeli hostages and Israel freed 90 Palestinian prisoners on Sunday, the first day of a ceasefire that ended the 15-month war.
Cryptocurrency investors remain in entertainment mode as they await Trump’s executive orders aimed at reducing regulatory hurdles and promoting widespread adoption of the digital asset.
Trump courted crypto campaign cash by promising to be a “crypto president” and launched the digital token on Friday, which at one point soared above $70 for a market value north of $15 billion. It last traded around $42, CoinMarketCap showed.
In the center of attention is the policy that Trump will enact on his first day in office. At a rally a day earlier, Trump said he would impose tough restrictions on immigration.
He vowed to rescind “every radical and stupid executive order of the Biden administration” within hours of taking office at noon ET (17:00 GMT).
“The new administration has indicated that it is ready to take immediate action and there is no reason to doubt it,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“On tariffs, some countries have already signaled they are ready to retaliate… Trump 2.0 is rumored to launch with as many as 100 executive orders planned on day one.”
which measures the U.S. currency against six others, was at 109.28 in early trade, close to a 26-month high of 110.17 hit last week.
The index has risen 4% since the US election in early November as traders expect Trump’s policies to boost growth but be inflationary, requiring interest rates to stay higher for longer.
Thierry Wizman, global FX and interest rate strategist at Macquarie, said traders were at best “wait and see” on tariffs and at worst were largely reluctant to reduce US disinflation. benefit of the doubt.
“This means that any mention of tariffs again … is likely to send the USD higher as well as (bond) yields.”
Last week’s slightly cooler core inflation data, bold comments from Federal Reserve Governor Christopher Waller and reports of a gradual phase-in of tariffs led traders to price in the prospect of two interest rate cuts this year.
Markets now estimate 42 basis points of easing in 2025. Shifting expectations weighed on the dollar last week, which posted its first week of decline in seven.
The yen was last at 156.18 against the dollar, not far from a one-month peak of 154.98 hit on Friday, and sources told Reuters the BOJ was likely to raise its interest rate this week barring market shocks when Trump takes office.
Governor Kazuo Ueda and his deputy said last week that the central bank would debate whether to hike, signaling an intention to raise borrowing costs at a policy meeting on Jan. 23-24 unless Trump’s inauguration speech turns markets around.
The euro was 0.14% higher at $1.0285 in early trade, but remained near two-year lows hit last week, while the pound rose 0.12% to $1.21825 as traders struggled with the gloomy British economic outlook.
