Trump is easy on China in the first week

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A rise in prices in Japan added impetus to the dollar sell-off in the Asian session as Donald Trump’s first week in office turned out to be less aggressive on trade policy than markets had expected.

The dollar is down 1.7% against the euro this week and is a touch higher against sterling. The dollar index was down 1.5 percent.

Tariffs are seen as good for the dollar because the U.S. is a big importer and, in theory, if exporting countries can’t find alternative customers, they can weaken their currencies to offset trade tariffs and maintain market share.

Tariffs appear to be on the way, but the conclusion drawn from just a few days into Trump’s second term appears to be negotiable.

In a Fox News interview, Trump said he would prefer not to use tariffs on China and had a friendly phone call with Chinese President Xi Jinping last week.

Trump earlier told the World Economic Forum in Davos via video link from Washington that he wanted the U.S.-China trade relationship to be “fair.”

“We don’t have to be dramatic,” he said.

Hong Kong’s Hang Seng rose 1.8% in the morning session. The Chinese yuan hit a six-week high against the dollar (.HK)(CNY/).

The Australian dollar hit a five-week high on China sentiment, and MSCI’s index of Asian emerging market currencies was on course for its biggest one-week percentage gain in 18 months. (AUD/) (EMRG/FRX)

The Bank of Japan raised short-term interest rates to 0.5%, the highest in 17 years. Traders pushed the yen up 0.6% to 155.12 per dollar despite the expected move.

Attention will now shift to a press conference by BOJ Governor Kazuo Ueda at 0630 GMT. British and European PMI figures are in for the session, with services outperforming manufacturing.

Futures signaled a wide open for Wall Street, setting the S&P 500 — which hit a record high on Thursday — for a weekly gain. (.N)

Key developments likely to impact the market on Friday:

– British and European PMI

(By Tom Westbrook; Editing by Edmund Kelman)