By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
The first full day of trading in financial markets in US President Donald Trump’s second term will get off to a strong start on Tuesday, with Trump’s seemingly more measured approach to tariffs providing an immediate shot in the arm to investor sentiment.
Trump issued a broad trade memo on Monday that failed to immediately impose new tariffs on key trading partners, something he previously indicated he would do on his first day in office. Instead, trade relations with China, Canada and Mexico will be assessed and reviewed before he decides what steps to take.
The US stock and bond markets were closed on Monday due to Martin Luther King Jr. Day, but currency markets were open, and the dollar’s sharp decline across the board reflected relief among investors that Trump appears to be toning down tariff rhetoric in favor of a less combative approach.
Even if it turns out to be only temporary.
The dollar index fell 1%, the biggest decline since August. The dollar may be primed for a decline given hedge funds’ positioning – the latest data from the Commodity Futures Trading Commission shows funds had a net long dollar position against a range of currencies worth $35 billion last week , the largest in nine years.
The dollar had risen about 10% since September, in addition to a more than 100 basis point increase in US Treasury yields, a tightening of financial conditions that hit Asian and emerging markets particularly hard. A pause or reversal should relieve that pressure.
U.S. stock futures point to a gain of about 0.4% on Wall Street on Tuesday. Asian markets were already ahead on Monday, with the MSCI Asia ex-Japan and the Nikkei 225 index both up more than 1%.
Markets around the world will be sensitive to the deluge of headlines likely to come out of Washington in the coming days as the new administration announces policy guidelines and executive orders. It promises to be a volatile week.
Crude oil prices fell further from last week’s six-month high, falling for a third day in a row, as traders await details of Trump’s executive order declaring a national energy emergency and pledging to build strategic reserves fill.
Cryptocurrencies, on the other hand, were livelier as the self-proclaimed “crypto president” was sworn in and bitcoin jumped to a new high of just under $110,000.
The Asian economic calendar is light on Monday, with producer price inflation from South Korea and consumer price inflation from Hong Kong the only major economic indicators. Expect markets to be guided by headlines from Washington, the rally in global stock markets and the plunging dollar.