Trump’s Tariff Wariness Lowers Dollar, Raises Stocks
by Jamie MacGyver
(Reuters) – A look at the day in Asian markets.
US President Donald Trump’s first full day of his second term in office is set to get off to a strong start Tuesday in financial market trading, with Trump giving investors an instant shot in the arm with his seemingly more measured approach to tariffs.
Trump issued a sweeping trade memo that stopped short of immediately imposing new tariffs on major trading partners, something he had previously indicated he would do on his first day in office. Instead, trade relations with China, Canada and Mexico will be reviewed and evaluated before deciding what action to take.
On Monday, US stock and bond markets were closed for Martin Luther King Jr. Day, but FX markets were open and the dollar’s sharp decline reflected relief among investors that Trump’s tariff talk was in favor of a less belligerent approach.
Even if it is only temporary.
The dollar index fell 1 percent, its biggest drop since August. The dollar may be set for a fall, going by hedge fund positions — the latest Commodity Futures Trading Commission data showed funds held net long dollar positions in various currencies worth $35 billion last week, the largest in nine years.
The dollar has risen nearly 10 percent since September, with U.S. Treasury yields up more than 100 basis points, particularly as financial conditions weighed on Asian and emerging markets. Pausing or reversing should ease that squeeze.
U.S. stock futures were up about 0.4% on Wall Street on Tuesday. Asian markets were on the front foot on Monday, with the MSCI Asia ex-Japan and Nikkei 225 indexes both rising more than 1%.
Global markets will be sensitive to headlines coming out of Washington in the coming days as the new administration announces policy directives and executive orders. It’s shaping up to be a dynamic week.
Crude oil prices fell for a third day from last week’s six-month high, as traders awaited details of Trump’s executive order and pledges to replenish strategic stockpiles.
In contrast, cryptocurrencies were more buoyant, with the self-proclaimed “Crypto President” sworn in and Bitcoin hitting new highs just shy of $110,000.
The Asian economic calendar is light on Monday, with producer inflation from South Korea and consumer inflation from Hong Kong leading economic indicators. Expect markets to take cues from headlines coming out of Washington, improving global stocks and a diving dollar.
