Dollar Holds Steady, Asian Stocks Show Cautious Gains as Trump Takes Office

Image Credit: Reuters

 

The dollar remained strong, and Asia's stock markets showed cautious optimism on Monday as investors awaited the anticipated policy announcements early in Donald Trump's second presidency. Investors are also looking ahead to a potential rate hike in Japan later in the week.

 

Trump will be inaugurated at noon Eastern Time (1700 GMT) and has promised a new era of "American strength," raising expectations for swift executive actions, including the launch of a digital token on Friday that briefly soared above $70, with a total market value surpassing $15 billion.

 

With Monday being a U.S. holiday, the immediate reactions to Trump's inauguration are expected to be felt in the foreign exchange markets, where traders are focusing on his tariff policies, and later in Asia on Tuesday. U.S. equity futures were slightly weaker, but the dollar, which has been rising since September due to strong U.S. data and Trump's campaign, remained steady.

 

Japan’s Nikkei rose 1%, while last week the S&P 500 saw its largest weekly percentage gain since early November, and the Nasdaq posted its biggest increase since December, driven by favorable inflation data. The dollar has gained nearly 14% against the euro since September, approaching a two-year high, though analysts suggest that a more gradual approach to tariff hikes may lead to some market pullback.

 

Trump has previously threatened tariffs of up to 10% on global imports and 60% on Chinese goods, along with a 25% surcharge on Canadian and Mexican products. These moves could disrupt trade flows, increase costs, and trigger retaliatory measures. On Monday, the Canadian dollar hit a five-year low, and the Mexican peso reached a 2.5-year low.

 

Meanwhile, Bitcoin dipped but remained above $100,000, and the 10-year Treasury yields closed at 4.61%, a 100-basis point increase in four months.

 

China, facing the harshest potential tariffs, remains a focal point. Recent positive growth data and a phone call between Trump and Chinese President Xi Jinping have given investors hope. Ken Peng from Citi Wealth noted that market focus is on how Xi Jinping responds to Trump, as their relationship is now crucial for policy direction. Chinese equities rose last week, and Hong Kong stock futures pointed to modest gains.

 

The yuan strengthened slightly to 7.3355 per dollar in offshore trade, while the Australian dollar, sensitive to trade and Chinese economic conditions, has recovered from five-year lows and could test resistance at $0.6322 if Trump’s policy changes don't meet market expectations. The yen was stable after a rally last week, with expectations of a 25-basis point rate hike from the Bank of Japan.

 

In commodities, gold remained steady at $2,694 an ounce, and Brent crude futures edged higher to $81.21 a barrel.

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.