Dollar slumped in Asia trade due to concerns over Trump’s trade policy

Economy - Mohit Shah - Jan 23,2017

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dollar slumped in asia trade due to concerns over trumps trade policy

Donald Trump’s plans to impose a protectionist agenda after pledging as the new president of the United States has dropped the value of the dollar in Asia trade on Monday.

On Sunday, Trump announced that he plans to reinitiate negotiations with Mexico and Canada over NAFTA, or the North American Free Trade Agreement, that came into effect in the early 1990s. Moreover, Trump said he would withdraw the U.S. out of the Trans-Pacific Partnership, which would have formed a 12-country free-trade association.  

In Asia trade, the yen escalated, while the dollar slumped to 113.42 yen, well below the more than 115 yen it gathered on Friday. Moreover, the pound was also up against the dollar, earning around $1.2433 at 11:03 a.m. HK/SIN, from an early low of $1.2352.  

The dollar index dropped as low as 100.29 in Asia trade, from an earlier high of 100.67. This level was quite low as compared to the value close to 101.50 on Friday.

Adam Reynolds, CEO for Asia Pacific at Saxo Bank said, reducing trade is quite negative for the dollar in the long run. He further added that, the isolationist policy is not at all beneficial for the dollar.

Several other analysts were also critical regarding Trump’s trade agenda and its effects on the greenback.

David Roche, president and global strategist at Independent Strategy said, “It's like a motor with two pistons, one going up, one going down.” He pointed out at Trump as the one going down.

Roche added several of Trump’s policies such as border tax and investing more money in a full employment economy are surely going to lift inflation.

Fed chief Janet Yellen restated last week that keeping interest rates low for a longer duration would push inflation and will eventually require the U.S. central bank to increase interest rates as a responsive action.