On Monday, after US President Donald Trump hit a protectionist tone in his inauguration speech, the Dollar slipped largely counterbalancing optimism that he will follow through on his promises of tax cuts and other stimulus.
US Stock Futures dipped as well by 0.2%, erasing previous gains made on Friday.
In his inaugural speech, President Trump pledged to end an “American carnage” of abandoned factories vowing to put “America first”, with two simple rules – buy American and hire American.
And on Sunday, Trump said he was planning to talk soon with Canada and Mexico leaders to start renegotiating the North American Free Trade Agreement (NAFTA).
Meanwhile the Dollar fell 1.1% against the Yen on Wednesday, edging towards its seven-week low of 112.57 Yen. The Euro gained 0.4% to $1.0746, its highest level since Dec. 8, 2016, while most emerging market currencies gained.
As for the Mexican Peso, which has been the weakest on Trump’s protectionist and anti-immigration stance, rose 0.6% to a two-week high of 21.44 per Dollar.
The 10-year U.S. Treasuries Yield fell by 2.432%, after having risen briefly to 2.513% on Friday. The two-year Yield, which is more sensitive to the Fed’s policy outlook, dropped abruptly to 1.180% after Wednesday’s cheerful comments from Federal Reserve Chair Janet Yellen.
“The market is getting nervous about the possibility that the world’s trade might shrink,” said to Reuters, Koichi Yoshikawa, executive director of financial markets at Standard Chartered Bank, Tokyo.
“Many of his policies, including tax cuts and infrastructure spending, need approval from the Senate and that (may not be) easy,” he said. “The markets that had been led by expectations on his policy since the election are now the dragged down by the reality.”
While the Dollar had soared late last year on expectations that Trump’s pledges to cut taxes and hike infrastructure spending would boost US economy, it seems that it has since lost steam.