By Tom Westbrook
SINGAPORE (Reuters) – The dollar was steady and Asian stock markets were cautiously positive on Monday as investors awaited an expected flurry of policy announcements in the early hours of Donald Trump’s second term as president and expected an interest rate hike in Japan later in the week.
Trump takes the oath of office at noon ET (17:00 GMT) and promised a “brand new day of American strength” at a rally on Sunday.
He fueled expectations that he would immediately issue a series of executive orders and, as a reminder of his unpredictability, on Friday launched a digital token, which at one point soared to more than $70 for a total market value north of $15 billion.
Monday is a holiday in the US, so the first reactions to his inauguration in traditional financial markets can be felt in the foreign exchange market, where traders are focused on Trump’s tariff policy, and then in Asian trade on Tuesday.
U.S. stock futures were marginally lower during the Asian morning on Monday, while the dollar, which has strengthened since September on strong U.S. data and as Trump’s finally successful political campaign gained momentum, held steady.
increased by 1%. ()
Last week saw its biggest weekly percentage gain since early November and the Nasdaq’s biggest since early December on some benign inflation data.
The dollar has risen almost 14% against the euro since September and at $1.0273 is not far from last week’s two-year record high. But the price tag is so high that some analysts believe a more gradual start to U.S. tariff increases could drive away some sellers.
“A strong start to Trump’s new term could shake nerves and give the dollar more support,” said Peter Dragicevich, currency strategist at Corpay.
“Conversely, based on what already appears to be baked in, we think a more measured approach could ease fears and see the dollar lose ground, as it did after Trump took office in 2017.”
Trump has threatened tariffs of as much as 10% on global imports and 60% on Chinese goods, plus an additional 25% on Canadian and Mexican imports, tariffs that trade experts say would disrupt trade flows, raise costs and provoke retaliation.
The Canadian dollar touched a five-year low of C$1.4486 to the dollar on Monday. The Mexican peso fell to a 2-1/2-year low of 20.94 to the dollar on Friday. [FRX/]
fell in the early part of the Asian day but remained above $100,000. Benchmark 10-year bond yields closed Friday at 4.61%, up nearly 100 basis points in four months. [US/]
CHINA FOCUS
China is in focus as the target of the toughest potential trade tariffs. Investors have been cheered recently by better-than-expected Chinese growth data and a phone call between Trump and Chinese President Xi Jinping on Friday that left both upbeat.
“Mostly everyone is waiting for these trade talks to start and see what kind of stance Xi Jinping takes with Trump,” Ken Peng, head of Asia investment strategy at Citi Wealth, told reporters in Singapore at an outlook briefing.
“That relationship between the two gentlemen became very important as a leading indicator of politics.”
Chinese stock markets rallied last week, with futures pointing to modest opening gains for Hong Kong shares.
The yuan is seen to adjust slowly to any changes in trade policy and was marginally firmer at 7.3355 to the dollar in offshore trade.
The Australian dollar, sensitive to trade flows and China’s economy, hit five-year lows and could test resistance at $0.6322 if Trump’s policy changes fail to meet market expectations, according to Commonwealth Bank strategist Joe Capurs. Last time it was $0.62.
The Japanese yen strengthened last week as remarks from Bank of Japan policymakers were taken as hints that a rate cut on Friday was likely.
It was last steady at 156.17 per dollar, with markets pricing in about an 80% chance of a 25 basis point rate hike.
As for commodities, gold traded at $2,694 an ounce, and futures rose to $81.21 a barrel.
