Published by Wayne Cole
SYDNEY (Reuters) – The dollar suffered heavy losses on Tuesday after U.S. President Donald Trump suspended new tariffs and reports suggested any new tariffs would be imposed in a “measured” manner. , a major relief for currencies open to trade.
Trump used his inaugural address to announce pressing issues on immigration and energy and a more expansive foreign policy, including a promise to restore the Panama Canal.
But there was only a brief mention of tariffs and, so far, no details on how or when they might be rolled out.
“That does not mean that tariffs will not be applied, but it has been taken as a sign of evolution and against universalism,” said Taylor Nugent, senior markets economist at National Australia Bank (OTC:).
The response in markets was swift, with Monday's 1.2% drop in the sharpest daily loss since late 2023. The index last stood at 108.060, just above support around 107.70.
The euro was up at $1.0416, having rallied 1.4% overnight to test resistance at $1.0435. The EU has a large trade surplus with the United States and was seen as a prime target for Trump's tariffs.
Likewise, Trump had threatened China with tariffs of up to 60% so without hard numbers on Monday the dollar rose 1.0% to 7.2642 yuan in offshore trade.
The Australian and New Zealand dollars, both open countries that rely heavily on trade, saw gains of around 1.5%.
The dollar outperformed the Japanese yen at 155.63 after falling just 0.4% overnight.
The yen had gained last week on growing expectations that the Bank of Japan would raise rates at its policy meeting this Friday.
There was little response in early US rate markets, partly due to the Martin Luther King Jr. Day holiday. and who feared that a combination of tariffs, immigration restrictions and tax cuts could risk bringing back inflation.
Markets haven't yet priced in another rate cut from the Federal Reserve until June or July, and around 40 basis points of easing is on the horizon by the end of the year.
Yields on the 10-year Treasury were expected to fall from 4.623% when Tokyo trading begins, with futures implied to start at 4.59%.
“There will be a lot for markets to digest this week, but if the implementation of trade and immigration policy does not adversely affect supply chains and their workers, financial markets may shed some of their recent inflationary caution.” release,” analysts at ANZ wrote in a note.
Trump's support for crypto currencies helped bitcoin hit a record high on Monday at $109,071.86, before easing back slightly to $103,791.
