The dollar consolidated its gains in early Asian trading on Thursday, November 07, after surging the previous day, as Donald Trump’s victory in the US presidential election augured inflationary policies, while the threat of punitive tariffs heightened concerns across Asia.

Dollar stabilizes, pressure on Japanese monetary policy

At around 01:45 GMT, the greenback was down 0.06% against the Japanese currency, at 154.53 yen to the dollar, but up 0.1% against the common European currency, at 0.9329 euro to the dollar. The dollar held on to most of its gains, having soared on Wednesday as the prospect of a return to the White House for the former Republican president became clearer.

With Congress in the hands of the Republicans, Donald Trump could implement his campaign promises, considered inflationary: massive tax cuts, higher tariffs, a drastic crackdown on immigration… “This second term will inflate inflation, forcing the Federal Reserve to adjust its monetary policy” by keeping its key rates high for longer, explains Daniela Sabin Hathorn, of broker Capital.com. “It would also mean a supportive and expansionary fiscal policy.”This would boost the economy and make Wall Street happy, but it would also lead to slippage in budget spending, which in turn would inflate indebtedness and thus US bond yields. High yields encourage investment in dollars.

For central banks in Asia, “it’s a crisis alert”Stephen Innes, an analyst at SPI Asset Management, adds that the surge in the greenback will significantly weigh down dollar-denominated debt.

For its part, the Bank of Japan, which had cautiously begun to raise its historically low rates, “is probably watching the yen’s rapid depreciation with concern, although direct intervention seems unlikely”. for the time being.

Bitcoin held above $75,000 on Wednesday, after hitting an all-time high of $76,475 the previous day, buoyed by the prospect of regulatory easing promised by Donald Trump.

Tokyo Stock Exchange divided

In Tokyo at around 01:45 GMT, the flagship Nikkei index was down 0.29% at 39,366.62 points, while the broader Topix index was up 0.90% at 2,740.38 points.

Bank stocks, which are likely to see their revenues swell with higher US yields, surged, such as Mizuho (+1.22%), MUFG (+3.24%) and SMFG (+3.69%). The yen’s plunge against the dollar helped boost exporters such as Toyota (+3.39%) and Nikon (+1.01%).

But technology stocks, including chipmaker Tokyo Electron (-2.88%), were in the doldrums, weighed down by the prospect of a more protectionist US policy.

“Weakening yen should support stock market”by making it more attractive to buy Japanese shares, “but caution is still called for in the face of (probable) US tariff increases”warned broker Tokai Tokyo Securities.

Oil recovers

Oil prices were recovering from a sharp fall on Wednesday, against a backdrop of a soaring dollar and the prospect of increased US supplies of black gold. At around 01:45 GMT, Brent North Sea crude was up 0.52% to $75.31 a barrel, while West Texas Intermediate (WTI) was up 0.40% to $72.07 a barrel.

As oil is traded in dollars, an appreciation of the greenback increases the cost of oil and tends to limit purchases. Furthermore, during his campaign, the former president promised to “drill at all costs” – which should boost fossil fuel production and put pressure on prices.

Concern on Chinese markets

Chinese markets are set to remain dominated by nervousness on Thursday, in the face of intensifying trade tensions expected under a new Trump presidency.

At around 01:45 GMT, shortly after the opening, the Shanghai Composite Index was down 0.05% at 3,383.08 points, while the Shenzhen Composite Index was down 0.10% at 2,047.45 points. In Hong Kong, the Hang Seng Index was down 0.44% at 20,447.07 points. “Trump’s victory is a source of uncertainty” and “the risk of US tariffs being raised to 60% against China” as promised by the former president, “will weigh on the yuan and Chinese stock markets”.stresses Lloyd Chan of MUFG.

In reality, “tariffs on Chinese exports could be more like 20 or 30%”.moderates Daniel Murray of EFG Asset Management. In his view, Beijing – which is due to unveil details of its stimulus plans at the end of the week – could adapt to the new situation by stepping up its spending to support the economy. Faced with prohibitive tariffs, “China will be able to either devalue the yuan to protect its exports, or trigger a massive fiscal stimulus to boost domestic demand.”adds Stephen Innes.