Dollar Rebound in Asia as Stocks Rise on Trump’s Policy Shift
Asian markets found relief on Wednesday with a notable dollar rebound and stronger stocks, following a shift in tone from President Donald Trump on both the Federal Reserve and US-China trade tensions. Investors, shaken earlier by uncertain policies, reacted positively as Trump confirmed he had no plans to dismiss Federal Reserve Chair Jerome Powell and signalled openness towards a trade deal with China.
Why the Dollar Rebound in Asia Matters
The dollar rebound lifted major currencies across Asia. Following Trump’s reassuring comments, the dollar gained 0.8% against the Japanese yen, reaching 142.72 after dipping to a seven-month low. It also jumped 0.8% on the Swiss franc, moving to 0.8262, while the euro slipped 0.6% to $1.1348. These moves signal renewed confidence in US assets among Asian investors after a period of uncertainty.
Stock indexes felt the boost as well. Japan’s Nikkei shot up 2.3% in early trading, and South Korea’s main index climbed 1.2%. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3%.
Market Optimism Grows as Trump Eases Fed Concerns
Trump had previously rattled markets by hinting at removing Jerome Powell, which led to a drop in investor trust around US monetary policy and a dip in the dollar. The sudden change in rhetoric helped calm nerves. Chris Weston, head of research at broker Pepperstone, noted, “Markets are becoming ever more conditioned to the President shooting from the hip and then reversing the stance like it was never a big issue.”
Longer-dated Treasuries also rallied as anxiety over US credibility eased. Yields on 30-year bonds fell 6 basis points to 4.812%, while yields on two-year bonds rose three points to 3.83%. This movement partly flattened the yield curve, reflecting adjustments in market expectations for future interest rates.
Stocks and the Dollar Rebound in Asia Lift Global Outlook
The dollar rebound in Asia spurred investors to buy back into previously beaten-down stocks. Wall Street responded overnight, with S&P 500 futures up 1.8% and Nasdaq futures climbing 2.0%. Key earnings results helped fuel the upward trend, with companies like Tesla rebounding despite missing some forecasts.
Investors’ mood improved further after Treasury Secretary Scott Bessent suggested there could be a de-escalation in US-China trade tensions—even if talks had yet to start. Trump himself clarified that he was open to a deal with tariffs far below the previously threatened 145%, though he emphasised that US terms would stand if Beijing did not negotiate.
Ongoing Risks and Recovery Across Markets
Despite the stronger dollar and stock gains, risks remain. The International Monetary Fund (IMF) recently downgraded growth forecasts for the US, China, and much of the world, citing continuing issues from tariffs and trade battles. Tariffs are still exerting downward pressure on global economies, underlining the fragility beneath the recent bounce.
Still, the general improvement in risk sentiment helped oil prices recover some recent losses. Brent crude rose another 67 cents Wednesday to $68.09 a barrel, while US crude stood at $64.31, up 64 cents. Meanwhile, safe-haven gold slipped 0.8% because investors were more willing to take risks, falling to $3,353 an ounce after briefly hitting a new high.
Dollar Rebound and the Outlook for Asian Investors
For Asian investors, the dollar rebound and uplift in stocks signal possible stability after a volatile period. The calming of White House-Federal Reserve tensions has eased concerns about US fiscal policy, making American assets slightly more attractive, at least in the short term. However, lingering doubts around tariffs and new trade negotiations continue to cast a shadow.
Fed fund futures also saw changes. The market now expects around 81 basis points in rate cuts by the end of the year, reducing earlier forecasts as sentiment shifts.
Source
Reuters – Stocks, dollar rebound in Asia as Trump steps back
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