Dollar Declines on Reduced Bullish Bets Ahead of Trump Inauguration
The US dollar experienced a decline against most major currencies on Monday. This occurred as traders scaled back bullish bets on the greenback in anticipation of President Donald Trump's second inauguration.
A Bloomberg dollar gauge dropped by 0.3%, influenced by Friday's phone call between Trump and Chinese President Xi Jinping, which eased trade tension concerns. Thin liquidity due to a US holiday may have contributed to the dollar's weakness against the Australian dollar and offshore yuan.
"We are anticipating Trump's speech and executive orders," said Rodrigo Catril, strategist at National Australia Bank. "Given the low liquidity, price signals should be interpreted with caution."
The decline follows data from the Commodity Futures Trading Commission indicating that bullish dollar bets have surged to near their highest levels since 2019. Betting on a stronger dollar has been a popular trade since Trump's election victory, increasing the risk of market volatility if these positions unwind.
The Euro rose by 0.4%, while the currencies of New Zealand and Australia, which reflect risk sentiment, also strengthened.
"Markets are reacting positively to the optimistic Trump-Xi call," said Carol Kong, strategist at Commonwealth Bank. "Expectations for policy announcements this week are high. However, if President Trump falls short of his promises, markets could rally further."