Written by Tom Westbrook
SINGAPORE (Reuters) – The dollar rose and Asian stock markets were cautiously positive on Monday as investors awaited an expected wave of policy announcements in the early hours of Donald Trump's second presidency and looked ahead to an interest rate hike in Japan at the end of the week. .
Trump will be sworn in at noon ET (1700 GMT), promising a “brand new day of American power” at a rally on Sunday.
He has raised expectations that he will issue a slew of executive orders immediately, and in a reminder of his unpredictability, he launched a digital token on Friday, which rose to trade above $70 at one point with a total market value of $15 billion.
Monday is a holiday in the United States, so the first reactions to his inauguration in traditional financial markets may be felt in FX, where traders are focusing on Trump's tariff policies, and then in Asian trade on Tuesday.
US stock futures were slightly weaker in the Asian morning on Monday, while the dollar, which had risen since September on strong US data and as Trump's successful political campaign finally gained momentum.
rose 1%. ()
Last week, the Nasdaq posted its biggest weekly percentage gain since early November, and the Nasdaq posted its biggest gain since early December on the back of some benign inflation data.
The dollar has risen about 14% against the euro since September, reaching $1.0273, a level not far from the highest level in two years recorded last week. But much of it is being priced in, with some analysts feeling the gradual start to lift US tariffs may attract some sellers.
“A strong start to Trump’s new term could shake the nerves and give the dollar more support,” said Peter Dragicevic, currency strategist at Corpay.
“By contrast, and based on what it already looks like, we think a more measured approach could ease concerns and see the dollar decline, as it did after Trump took office in 2017.”
Trump has threatened to impose tariffs of up to 10% on global imports and 60% on Chinese goods, in addition to additional import duties of 25% on Canadian and Mexican products, which trade experts say will upend trade flows, increase costs and lead to retaliation.
The Canadian dollar touched a five-year low of 1.4486 Canadian dollars to the dollar on Monday. The Mexican peso hit its lowest level in two and a half years at 20.94 to the dollar on Friday. (FRX/)
It fell in the first part of the Asian day but remained above $100,000. 10-year Treasury yields closed Friday at 4.61%, up nearly 100 basis points in four months. (we/)
Focus on China
China is in focus as a target of the harshest potential trade tariffs. Investors have recently cheered better-than-expected Chinese growth data and Friday's phone call between Trump and Chinese President Xi Jinping that left both optimistic.
“Everyone is basically waiting for these trade negotiations to start and see what kind of stance Xi Jinping will take with Trump,” Ken Peng, head of Asia investment strategy at Citi Wealth, told reporters in Singapore at a news conference about the outlook.
“That relationship between the two gentlemen has become very important as a leading policy indicator.”
Chinese stock markets rose last week and futures pointed to modest gains for Hong Kong stocks at the open.
The yuan is expected to adjust slowly to any shifts in trade policy and was slightly firmer at 7.3355 to the dollar in foreign trade.
The Australian dollar, sensitive to trade flows and the Chinese economy, has hit a five-year low and, according to Joe Capurso, a strategist at Commonwealth Bank, could test resistance at US$0.6322 if Trump's policy changes fall short of market expectations. The last price was $0.62.
The Japanese yen rose last week as comments from Bank of Japan policymakers were seen as hints at a possible interest rate cut on Friday.
It last settled at 156.17 to the dollar and price markets identified an 80% chance of a 25 basis point rate hike.
In commodities, gold reached $2,694 per ounce and futures rose to $81.21 per barrel.
