Investing.com — Most Asian currencies weakened on Tuesday as the dollar recovered following the inauguration of US President Donald Trump, while the Japanese yen and Malaysian ringgit gained in value ahead of their central banks’ interest rate decisions this week would take place.
Trump took office overnight and announced a series of executive orders, underscoring his campaign promises.
The stock rose 0.3% in trading in Asia, after losing more than 1% overnight. were also 0.3% higher.
Asian currencies fall under Trump 2.0 due to tariff fears
Regional currencies were under pressure from a rising dollar, boosted by anticipation of new trade tariffs under the Trump administration. Trump has not provided details on the imposition of new tariffs, although reports indicate they are expected to be announced gradually.
Trump had promised to impose up to 60% additional tariffs on Chinese exports. If imposed to their full extent, new tariffs could have a significant impact on most Asian economies due to their trade-dependent economies.
The Australian dollar pair fell 0.4%, while the Singapore dollar pair rose 0.2%.
The Chinese yuan’s offshore pair rose 0.3%, while the onshore pair was largely unchanged on Tuesday.
The Indonesian rupiah pair rose 0.5%, while the Philippine peso gained 0.3%.
The Indian rupee pair rose 0.1%, while the South Korean won pair was largely subdued.
The dollar’s strength is expected to put further downward pressure on regional currencies as new tariffs would likely lead to reduced trade imbalances and higher inflation.
Tariffs are intended to reduce imports, which can narrow the trade deficit by restricting the flow of dollars out of the U.S. economy. This reduced supply in the global market can increase its value against other currencies.
Moreover, they could fuel inflationary pressures. Markets can then anticipate that the Federal Reserve will maintain interest rates for longer, further strengthening the dollar.
We were waiting for interest rate decisions for Japan and Malaysia
The Japanese yen pair fell 0.5% as markets priced in a rate hike later this week.
The BOJ is expected to raise rates provided there are no market disruptions after Trump’s inauguration. The central bank is likely to reiterate its commitment to further rate hikes as the economy continues its recovery, Reuters reported, citing sources familiar with the matter.
The Malaysian ringgit pair fell 0.5% lower, ahead of the . The BNM is expected to keep interest rates steady at 3.00% for the tenth time in a row on Wednesday, thanks to robust economic growth and controlled inflation, a Reuters poll showed.
