Dollar Dips as Trump's Inaugural Tariff Threat Remains Unclear

The dollar weakened as Trump decided not to impose trade tariffs immediately upon inauguration. Market comfort, however, could be premature with targeted tariffs possible. The dollar index dropped significantly, compounded by a U.S. holiday. Trump's fiscal policies, including cryptocurrency initiatives, remain under market focus.

The value of the U.S. dollar experienced a notable decline on Monday after President-elect Donald Trump stated he would not implement trade tariffs right after his inauguration. This announcement came as Trump plans to release a broad trade memo that refrains from introducing new tariffs on his first day in office, according to a report by the Wall Street Journal, corroborated by an incoming administration official.

Market watchers had anticipated a different approach, expecting Trump to leverage executive orders to declare trade tariffs, which might have led to increased forecasts for an expansive economic strategy, rising inflation, and higher durations for Federal Reserve policy rates. 'Markets seem to be taking comfort from a headline suggesting that day-one Trump tariffs are off the table. That said, we think this confidence might be a little misplaced,' cautioned Nick Rees, head of macro research at Monex Europe.

The dollar index, comparing the U.S. currency against six others, fell by up to 1.3% and was last recorded down at 108.23 following its peak at 110.17 last week. Lighter trading volume was observed due to the Martin Luther King Jr. Day holiday in the U.S. As markets keep a close eye on Trump's fiscal moves, anticipated changes in immigration and taxation policies remain under scrutiny.

(With inputs from agencies.)