Investing.com – The US dollar fell lower on Monday, defensively at the start of a new week of Donald Trump’s return to the White House, with volumes hit by the US holiday.
At 04:10 ET (09:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.3% lower at 108.925, but still not far from its highest point in more than two decades. year from last week.
Dollar on hind foot
The dollar has started the new week on the back foot, rising about 4% since the US presidential election in November as traders expected Trump’s policies to be inflationary, necessitating higher interest rates for an extended period.
Volumes are likely to decline on Monday as US markets are closed due to the Martin Luther King Jr. Day holiday, and as traders await Trump’s inauguration speech later in the day.
Investors are closely watching how Trump prepares to start his second term after the new president indicated he plans to sign a series of executive orders on his first day.
“Financial markets are on edge to see what executive orders newly elected US President Donald Trump will issue on his first day in office,” ING analysts said in a note.
“FX markets are most interested in what he has to say about tariffs and what kind of pain the Oval Office plans to inflict on major trading partners.”
ING added: “After four months of buying on the rumor, the dollar is now exposed to some selling on this fact – but there should be plenty of dollar buyers.”
The euro bounces back from a two-year low
In Europe, it rose 0.3% to 1.0313 but remained near last week’s two-year low amid trade war concerns after European Central Bank Isabel Schnabel said this weekend that a trade conflict was “very likely”.
“Perhaps the euro should be concerned that online prediction markets are only offering low rates for the EU this week,” ING added. “We also doubt that the currency markets are fully priced based on universal rates and that the EUR/USD would be affected if these were to emerge.”
rose less than expected in December, data showed earlier Monday, rising 0.8% on the year, below the expected 1.1% increase.
The European Central Bank has cut interest rates four times since June and is expected to continue doing so over the next six months after eurozone inflation fell from double digits at the end of 2022 to just above the 2% target.
was trading 0.1% higher at 1.2193, with the British pound down almost 3% last month, after recent weak economic data pointed to further interest rate cuts in the coming year.
Rates were cut twice in 2024 and are widely expected to be cut in February at the next policy-setting meeting.
Yen awaits BoJ meeting
In Asia, yields fell 0.1% to 156.19 after markets priced in a rate hike at the Bank of Japan’s policy meeting later this week.
Interest rates are expected to rise provided there are no market disruptions after Trump’s inauguration.
traded 0.2% lower to 7.3143, following the People’s Bank of China’s decision to remain stable, with the prime rate for one-year loans unchanged at 3.1% and the five-year rate, which is used to determine of the mortgage interest rate, at 3.60%.
This move, aimed at supporting a weakening yuan, supporting liquidity and supporting economic recovery, had little impact on market sentiment for the currency.
