By Wayne Cole
SYDNEY (Reuters) – The dollar suffered widespread losses on Tuesday after US President Donald Trump refrained from imposing new tariffs and reports indicated that any new taxes would be imposed in a “measured” manner, to the relief of currencies that are heavily exposed to trade.
Yields on 10-year Treasury notes fell 6 basis points to 4.56%, as investors worried that imposing tariffs too quickly would risk renewed inflation.
Trump used his inaugural address to declare emergencies on immigration and energy and a more expansive foreign policy, including a pledge to restore the Panama Canal.
However, there was only a brief mention of tariffs in Trump's inaugural address, and the subsequent memo only directed agencies to investigate and address the persistent trade deficit.
“This does not mean that tariffs will not be imposed, but it has been seen as a signal towards gradualism and against globalism,” said Taylor Nugent, chief markets economist at National Australia Bank.
Markets reacted quickly, falling 1.2% on Monday in the biggest daily loss since late 2023. The index last stood at 108.010, just above support at 107.70.
The euro rose to $1.0421, after rising 1.4% overnight to test resistance at $1.0435. The European Union runs a large trade surplus with the United States and was seen as a prime target for Trump's tariffs.
Likewise, Trump threatened China with tariffs of up to 60%, so the absence of any specific numbers saw the dollar fall to 7.2624 yuan, after falling 1% overnight.
The Australian and New Zealand dollars, both open countries that rely heavily on trade, saw gains of about 1.5%.
The dollar fared relatively better against the Japanese yen at 155.30, having fallen just 0.4% overnight.
The yen made gains last week amid growing expectations that the Bank of Japan will raise interest rates at its policy meeting on Friday.
The lack of concrete tariff measures has made investors more pessimistic about the outlook for US interest rates. Futures added about 4 basis points of additional Fed easing this year, putting interest rates at 3.90% by December.
The probability of a quarter-point cut early in May rose to about 50%, from 31% the week before.
“There will be a significant amount of work for markets to digest this week, but if the implementation of trade and immigration policy does not negatively disrupt supply chains and the workforce, financial markets may ease some of their recent caution on inflation,” analysts at ANZ wrote. In a note.
Trump's support for cryptocurrencies helped Bitcoin reach a record high on Monday at $109,071.86, before falling to $102,000 in Asia on Tuesday.
