By Nell Mackenzie and Tom Westbrook
LONDON/SINGAPORE (Reuters) -The dollar drifted lower and global stocks were cautiously positive on Monday as investors awaited a flurry of policy announcements during the first hours of Donald Trump’s second presidency and eyed a rate hike in Japan at the end of the week.
Trump takes the oath of office at noon Eastern Time (1700 GMT), and promised a “brand new day of American strength” at a rally on Sunday.
He has stoked expectations of an immediate slew of executive orders and, in a reminder of his unpredictability, launched a digital token on Friday, which soared above $70 before sliding to around $50 as traders turned uneasy.
Monday is a U.S. holiday, so the first responses to his inauguration in financial markets may be felt in foreign exchange and then during Asian trade on Tuesday.
European stocks edged lower after an initial tick upward at the open. The pan-European STOXX 600 crept down 0.2%, with the region’s main indices all flat and Spain’s down 0.1%. MSCI’s All-World index was last up 0.1%.
Euro zone bond yields inched upwards by 1223 GMT, with French and German 10-year benchmark bond yields all ticking up around one basis point. UK 10-year bond yields rose four basis points. Bond yields move inversely to prices.
“Trump dominates everything in terms of where we go,” Societe Generale chief FX strategist Kit Juckes said in his morning note, referring to markets in general. He noted that trader positions betting on a rise in the dollar had reached their highest since 2022.
The dollar is up more than 8% against the euro since September and at $1.0317 is not far from last week’s two-year high. But so much is priced in that some analysts feel sellers may step forward if the tariff hikes that Trump has flagged start more slowly than expected.
Trump has threatened tariffs of as much as 10% on global imports and 60% on Chinese goods, plus a 25% import surcharge on Canadian and Mexican products, duties that trade experts say would upend trade flows, raise costs and draw retaliation.
The Canadian dollar touched a five-year low of C$1.4465 per dollar on Monday.
Bitcoin shot up 4%, hitting, at one point, a record high of $108,943, while Trump’s new cryptocurrency launched on Friday – known as $TRUMP – soared to nearly $12 billion in market value, drawing billions in trading volume. First Lady Melania Trump’s cryptocurrency launched on Sunday hit a market cap of $1.9 billion.
CHINA FOCUS
China is in focus as the target of the harshest potential trade levies. Investors have cheered better-than-expected Chinese growth data and a Friday phone call between Trump and Chinese President Xi Jinping that left both upbeat.
Hong Kong’s Hang Seng closed up 1.8% and China’s yuan rallied. [.HK]
“Basically everyone is waiting for these trade negotiations to begin and see what kind of attitude Xi Jinping takes with Trump,” Ken Peng, head of Asia investment strategy at Citi Wealth told reporters in Singapore.
“That relationship between the two gentlemen has become very important as a leading indicator of policies.”
The yuan is seen likely to slowly adjust to any shifts in trade policy and touched a two-week high of 7.3088 to the dollar. [CNY/]
Japan’s yen rallied last week as remarks from Bank of Japan policymakers were taken as hints that a rate cut is likely on Friday.
It was last slightly stronger at 156.335 per dollar and markets priced about an 80% chance of a 25 basis point rate hike.
In commodities, gold hovered at $2,707 an ounce and Brent crude futures dipped on expectations that Trump may ease curbs on Russia’s energy sector in return for a truce in Ukraine. [O/R]
(Editing by Stephen Coates, Bernadette Baum and Kevin Liffey)
