Trump Nominates Bessent as Treasury Secretary, Dollar Index Falls Sharply
In early Asian trading on November 25, the dollar index opened lower and continued to decline, currently at 106.93 with a drop of about 0.5%, completely retracting last Friday's gains. This movement was influenced by President-elect Trump's nomination of veteran Wall Street investor Scott Bessent as Treasury Secretary. Bessent is known for his fiscally conservative stance and deep investment background, and his appointment has eased market concerns about future stringent trade policies.
Analysts point out that Bessent's advocacy for tax reform and deregulation could reduce the likelihood of harsh tariff implementations. This move not only reassured the bond market but also led to a drop in the 10-year U.S. Treasury yield to 4.33%, its lowest since November 12, weakening the interest rate advantage of the dollar.
Dollar Declines, Non-U.S. Currencies Rise
The decline in the dollar led to a general rise in non-U.S. currencies. The euro rose by 0.63% against the dollar to 1.0481, approaching the intraday high of 1.0500. Technically, the euro has support at 1.0195 and 1.0000, while resistance is at 1.0555 and 1.0610. The market remains focused on the long-term impact of weak eurozone economic data on the euro's trend.
The dollar fell 0.4% against the yen, at 154.11, briefly hitting a four-day low of 153.81. The pound rebounded 0.5% against the dollar to 1.2595, still below last week's high of 1.2714, with technical indicators showing its short-term trend remains weak. The Australian dollar rose 0.71% against the dollar, while the New Zealand dollar rose 0.48%, trading around 0.6545 and 0.5862 respectively.
Market Expectations and Technical Performance
The market reacted positively to Bessent's nomination, with E-mini S&P futures rising 0.4%, but the dollar index may be entering a consolidation phase. The dollar has previously risen for eight consecutive weeks, marking the third time this century, with many technical indicators showing overbought signs. Moreover, the futures market's expectation for the Fed to cut rates by 25 basis points in December has decreased from 72% a month ago to 52%, adding downward pressure on the dollar.
On the other hand, the more aggressive easing policy expectation from the European Central Bank has led to market anticipation of a 154 basis point rate cut by the end of next year, while the Fed is expected to cut rates by only 65 basis points. This policy difference provides potential support for the dollar.
Outlook and Risk Focus
The market is currently focused on Germany’s November IFO Business Climate Index and the G7 Foreign Ministers’ meeting. Additionally, developments in the Middle East geopolitical situation and updates regarding the Russian-Ukrainian conflict may further impact market sentiment. In the U.S., policy interpretations following Bessent’s nomination remain a focal point, particularly concerning the potential volatility in the dollar’s trend and U.S. Treasury yields.
Although Bessent has publicly supported a strong dollar and tariff policies, his specific policy stance still needs time to be tested. Analysts warn that the dollar's decline may only be a temporary adjustment, and its future trend still heavily depends on Federal Reserve policies, economic data performance, and the evolution of international trade situations.
