Published by Ankur Banerjee
SINGAPORE (Reuters) – The dollar was on the defensive at the start of an important week on Monday as Donald Trump returned to the White House, with his inaugural address later in the day a key focus for investors hoping the policies to confirm it immediately.
The yen strengthened, holding on to a one-month high last week, as traders bet the Bank of Japan will raise its policy interest rate this week, raising short-term borrowing costs. to levels not seen since the 2008 global financial crisis.
Trading volume is expected to be thin because US markets are closed for the Martin Luther King Jr. Day holiday.
Cryptocurrency investors will remain in party mode, awaiting executive orders from Trump aimed at reducing regulatory barriers and widespread adoption of digital assets.
Trump courted crypto campaign funds promising to be a “crypto president” and launched a digital token on Friday, which soared above $70 at one point for a market value north of $15 billion. It was last trading around $58, CoinMarketCap showed.
the world's most famous cryptocurrency, slightly weaker at $102,550 on Monday. It has risen 80% since the US election in early November, touching a peak last month.
The focus is firmly on the policies Trump will implement on his first day in office. At a rally on Sunday, Trump said he would impose significant limits on immigration.
Goldman Sachs strategists expect US policy changes to support the dollar's strength, but warned of near-term risks due to market expectations for swift action on tariffs.
Instead, Goldman strategists expect a series of major news over time on tariffs, similar to Trump's first presidency. “We think the storm is just moving in. We expect it to pay to be patient.”
GET AND GO
The , which measures the US currency against six peers, was 0.16% lower at 109.16, but neared a 26-month high of 110.17 touched last week.
The index has risen 4% since the election as traders expect Trump's policies to boost growth but also inflation, requiring higher interest rates for longer.
The euro advanced 0.26% to $1.029775, but remained near a two-year low touched last week as threats of tariffs loomed. Sterling rose 0.27% to $1.2201.
Thierry Wizman, global foreign exchange and interest rates strategist at Macquarie, said that when it comes to tariffs, traders are in “wait and see” mode at best and, at worst , largely unwilling to give deflation in the US the benefit of the doubt.
“That means any fresh mention of tariffs … is likely to send the USD higher, as well as (bond) yields.”
Slightly cooler core inflation data last week, dovish comments from Federal Reserve Governor Christopher Waller and reports of tariffs being phased in have led traders to price expectations of two rate cuts smooth this year.
Investors are also monitoring developments in the Middle East after Hamas released three Israeli hostages and Israel freed 90 Palestinian prisoners on Sunday, marking the first day of a ceasefire. which ended a 15-month-old war.
The yen was last at 155.98 per dollar, close to a monthly high of 154.98 touched on Friday, with sources telling Reuters the BOJ was likely to raise its policy interest rate this week this prevents a market shock when Trump takes office.
Governor Kazuo Ueda and his deputy said last week that the central bank will debate whether to hike, signaling plans to raise borrowing costs at a policy meeting on 23- January 24th.
The increase by the BOJ was the first since last July, when the move, combined with weak US jobs data, surprised traders and triggered a global market rout in early August.
HSBC's chief Asian economist, Fred Neumann, said that economic data in Japan indicates that monetary policy adjustment is definitely needed this year.
The BOJ should have raised rates in December, Neumann said at an HSBC outlook event in Singapore. “So we think it's good now to do this (walk rates).”
