Market Shift: Dollar Dives, Bitcoin Soars Ahead of Trump’s Inauguration
As the world awaited Donald Trump’s inauguration as U.S. president, the market landscape underwent a significant transformation. The U.S. dollar plummeted, while bitcoin reached an all-time high, fueled by expectations of policy announcements that could impact the greenback.
Yen Strengthens Amid Rate Hike Speculation
The yen surged, holding onto a one-month high, as traders bet on the Bank of Japan increasing its policy interest rate this week. This potential move would be the first since last July, when a similar hike sent shockwaves through global markets.
Thin Trading Volume Expected
With U.S. markets closed for the Martin Luther King Jr. Day holiday, trading volume was anticipated to be thin. However, softer U.S. inflation data and the prospect of multiple Federal Reserve rate cuts have recently boosted risk assets, including bitcoin.
Bitcoin’s Record High
Bitcoin hit a record high of $109,071.86 on Monday, with some analysts attributing this surge to Trump’s promise to be a “crypto president.” His expected executive orders aimed at promoting widespread adoption of digital assets have sparked optimism among investors.
Policy Announcements in Focus
Investors were keenly focused on the policies Trump would enact on his first day in office. At a rally on Sunday, Trump announced plans to impose severe limits on immigration, sparking concerns about potential delays in implementing measures that could disrupt the positive market momentum.
Dollar Index Dips
The dollar index, which measures the U.S. currency against six peers, fell 0.32% to 109.08. Despite this dip, the dollar has risen 4% since the November presidential election, driven by expectations of Trump’s policies boosting growth and inflation.
Euro Advances Amid Tariff Threats
The euro advanced 0.39% to $1.031, but remained near a two-year low, as tariff threats weighed heavily on the market. Analysts warned that if Trump invokes the International Emergency Economic Powers Act (IEEPA) for trade, it could signal a strong intent to impose large-scale tariffs.
Fiscal Stimulus in Focus
On the fiscal front, investors were watching to see if President Trump would mention fiscal stimulus in his inaugural address. This could have significant implications for the market, particularly if it leads to increased government spending.
BOJ Rate Hike Expectations
The yen was last at 156.11 per dollar, not far from the one-month high of 154.98 touched on Friday. Sources indicated that the BOJ was likely to raise its policy interest rate this week, barring market shocks, with a 25 basis points hike and 50 bps by year-end priced into money markets.
Middle East Developments
Investors were also monitoring developments in the Middle East, where a ceasefire has brought a temporary halt to the 15-month-old war. The release of Israeli hostages and Palestinian prisoners on Sunday marked a significant step towards peace in the region.
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