The dollar edged lower, and stocks showed cautious gains on Monday as investors awaited key policy announcements during the initial hours of Donald Trump’s second term as U.S. president. They also kept an eye on a potential rate hike in Japan later this week.
Trump will take the oath of office at noon Eastern Time (1700 GMT) and pledged a “brand new day of American strength” during a rally on Sunday. Anticipation is high that he will issue a wave of executive orders soon after his inauguration. In a move highlighting his unpredictability, Trump launched a digital token on Friday, which surged past $70 before retreating to around $50 as traders grew wary.
Monday’s U.S. holiday means initial market reactions to Trump’s inauguration will likely play out in foreign exchange markets and Asian trading on Tuesday. U.S. equity futures dipped slightly during the Asian session, while the dollar—up significantly since September on robust U.S. data and Trump’s political ascent—eased marginally. European and FTSE futures remained largely flat, while Japan’s Nikkei (.N225) climbed 1.2%.
“My sense is a lot is in the price,” said Nick Ferres, CIO at Vantage Point Asset Management in Singapore. “We are still running a low net equity exposure overall because our sense is that the magnitude and speed of the rise in yields and dollar is now challenging for equity valuations.”
The dollar has gained over 8% against the euro since September, trading at $1.0306, close to last week’s two-year high. However, some analysts believe a gradual rollout of U.S. tariff hikes might prompt a shift in sentiment among sellers.
Trump has proposed tariffs as high as 10% on global imports, 60% on Chinese goods, and a 25% surcharge on Canadian and Mexican products. Experts warn that such measures could disrupt trade flows, increase costs, and provoke retaliatory actions.
The Canadian dollar hit a five-year low of C$1.4486 against the U.S. dollar on Monday, while the Mexican peso reached a two-and-a-half-year low of 20.94 per dollar last Friday. Meanwhile, Bitcoin dipped during early Asian trading but remained above $100,000. Benchmark 10-year Treasury yields ended Friday at 4.61%, marking a nearly 100-basis-point rise over four months.
