Trump will issue a broad trade memo on Monday that stops short of imposing new tariffs on his first day in office, an official for the new Trump government said.
Trump mentioned no specific tariff plans in his inaugural address, but repeated his intention to create the External Revenue Service, a new agency to collect “massive amounts” of tariffs, duties and other revenues from foreign sources.
Sworn in as the 47th president of the US, Trump, in his half-hour speech, listed a series of executive actions he intends to take immediately on Monday, including declaring a national emergency at the US-Mexico border and dispatching troops there.
Market participants had been expecting Trump to announce trade tariffs via executive orders. Such a move would have increased expectations for a large-scale campaign, rising inflation and higher-for-longer Federal Reserve policy rates.
“There is a relief rally in foreign currencies, right now,” said Marc Chandler, chief market strategist, at Bannockburn Global Forex in New York.
“Even though Trump did not specify, it’s very clear that when he says that the US is going to be a big auto manufacturer, he’s talking about tariffs. So whether he imposes them on Day 1 or Day 5 or Day 10, I’m not sure it makes that much of a difference,” he added.
The dollar index, which measures the US currency against six others, fell by as much as 1.3% and was last down 1% at 108.26. It hit a 26-month high last week of 110.17.
Against the Canadian dollar, the greenback fell 1.3% to C$1.4295, after earlier hitting its weakest level since mid-December.
Trading volume was lighter than usual due to US markets being closed for the Martin Luther King Jr Day holiday.
Since the November presidential election, the greenback has risen 4% as traders anticipate Trump’s policies will boost growth and inflation.
Investors’ attention was firmly fixed on the policies Trump will enact on his first day in office. At a rally on Sunday, Trump said he would impose severe limits on immigration.
Some analysts were expecting Trump to invoke the International Emergency Economic Powers Act (IEEPA).
IEEPA is a federal law in the US that grants the president the authority to regulate economic transactions in response to unusual and extraordinary threats.
Along with tariffs, immigration and tax cuts will be the main issues under market scrutiny.
On the fiscal front, “we will be watching to see if President Trump mentions fiscal stimulus,” said Ajay Rajadhyaksha, research analyst at Barclays.
The euro rose 1.2% to US$1.0394. It hit a two-year low of US$1.0177 last week.
Meanwhile softer US inflation data and the prospect of multiple Fed rate cuts have recently boosted risk assets, including bitcoin, which hit a record high on Monday at $109,071.86 and was last down 1.8% at $102,745.83.
Trump has promised to be a “crypto president”, and is also expected to issue executive orders aimed at promoting widespread adoption of digital assets.
The president’s new cryptocurrency launched on Friday – known as $TRUMP – soared to nearly US$12 billion in market value, drawing billions in trading volume by Monday. First Lady Melania Trump’s rival token launched on Sunday hit a market cap of US$1.9 billion.
Meanwhile, the dollar slid 0.6% against the Chinese yuan to 7.2790, after earlier falling to its lowest since mid-December.
The Chinese unit has outperformed most of its peers since the US elections despite expectations for strong US tariffs, as the People’s Bank of China has continued efforts to maintain currency stability.
Japan’s yen also held firm, leaving the dollar down 0.4% at 155.745 ahead of the Bank of Japan’s policy meeting this week at which it is widely expected to raise interest rates.