(Bloomberg) — The dollar inched lower against most major currencies as traders trimmed widely-favored bullish positions on the greenback just hours ahead of Donald Trump’s second inauguration as the US President.
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A Bloomberg gauge of the dollar declined as much as 0.3% on Monday, as Trump’s call on Friday with China President Xi Jinping helped ease jitters over trade tensions between the two nations. Thin liquidity due to a holiday in the US likely exacerbated the greenback’s weakness against everything from Australia’s dollar to the offshore yuan.
“We are all waiting for the big event — Trump’s speech and executive orders to follow,” said Rodrigo Catril, strategist at National Australia Bank Ltd. in Sydney. “Liquidity is thin and one should treat the price action signaling with care.”
The moves come after speculative currency traders boosted bullish dollar wagers to around the highest levels since 2019, according to the latest Commodity Futures Trading Commission data. Betting on a stronger dollar has become one of the market’s favored trades following Trump’s election victory, heightening the risk of large market swings should such positions unwind.
New Zealand and Australia’s currencies — often seen as proxies for risk sentiment — gained against the greenback on Monday. South Korea’s won, another currency sensitive to global trade and growth, topped the Asian currency ranking.
“Markets are getting a sentiment boost from the encouraging Trump-Xi call,” said Carol Kong, strategist at Commonwealth Bank of Australia. “Markets seem to have high expectations of policy announcements this week. The risk is President Trump will fail to deliver on his big promises, providing more relief to markets.”
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