Written by Neil McKenzie
LONDON (Reuters) – The dollar fell broadly on Monday, while European stocks jumped, after an official in the incoming U.S. administration said that President-elect Donald Trump would stop short of imposing tariffs at his inauguration, which will be held later today.
European stock markets were firmly in positive territory in afternoon trading after the Wall Street Journal reported that Trump would not impose tariffs on imports immediately after his swearing-in later Monday.
The European STOXX 600 index rose 0.3 percent, with all major indices in the region rising about 0.5 percent. The MSCI World Index rose in recent trading by 0.4%.
The dollar fell as much as 1.3% at one point, and fell particularly sharply against the currencies of the United States’ largest trading partners, such as the Canadian dollar, Mexican peso, euro and Chinese yuan.
Trump will be sworn in at noon ET (1700 GMT), promising a “brand new day of American power” at a rally on Sunday.
He raised expectations with an immediate series of executive orders and, in a reminder of his unpredictability, launched a digital token on Friday, which rose above $70 before falling to around $50 as traders grew nervous.
Monday is a holiday in the United States, so the first reactions to his inauguration in the financial markets may be felt in the foreign exchange market, and then during Asian trading on Tuesday.
Euro zone bond yields were stable by 1518 GMT.
“In the past two weeks, we have seen two conflicting views from the new administration – hawks on tariffs and those who favor a more market-friendly approach,” said Frederic Ducrozet, head of macroeconomic research at Pictet Wealth Management.
He added, “So the perception that the door is open for negotiations is important. But it does not tell us where we will end up, and I will wait for details regarding the scope of customs duties and the sectors that will be affected.” : “The fact that he may choose a gradual approach is an encouraging sign.”
The dollar fell 1.15 percent against the Canadian dollar to 1.4319 Canadian dollars and fell 1.4 percent against the Mexican peso.
Trump has threatened to impose tariffs of up to 10% on global imports and 60% on Chinese goods, in addition to additional import duties of 25% on Canadian and Mexican products, which trade experts say will upend trade flows, increase costs and lead to retaliation.
The yuan strengthened itself sharply in the offshore market, leaving the dollar down about 1% on the day at 7.274.
The Australian dollar, which can serve as a more liquid alternative to the Chinese currency, rose 1.2% on the day to US$0.6262. Meanwhile, the euro rose 1.3 percent during the day to $1.0401, heading towards the largest one-day rise since late 2023.
https://media.zenfs.com/en/reuters-finance.com/1b479bbd880f23a83f620fc1f98b90ec
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