Dollar falls after Donald Trump names Scott Bessent to Treasury role

The US dollar weakened and Treasuries rallied on Monday as the nomination of Scott Bessent as Treasury secretary eased investor fears over president-elect Donald Trump’s trade tariff plans.

The dollar index, which tracks a basket of currencies such as the yen and euro, was down as much as 0.7 per cent in Asia, before paring losses to trade down 0.6 per cent. The euro gained 0.7 per cent against the US funds.

The index had rallied more than 7 per cent from the beginning of last month to Friday, as a major beneficiary of a so-called Trump trade on expectations that his policies of tariffs and responsibility cuts would drive worth rise and put upward pressure on US yield rates.

But the selection of Bessent, who last month described sweeping tariffs as “maximalist” positions, is being taken by investors as a sign that the president-elect’s policies may be moderated.

Earlier this month, Bessent told CNBC that he would recommend that tariffs be “layered in gradually” to mitigate the uncertainty of shocks in the trade.

“Having at least one significant advocate around the cabinet table arguing against persistent trade taxes is a positive for markets,” said Paul Donovan, chief economist at UBS Global riches Management.

US Treasuries, which have sold off on the prospect of inflationary pressures, rebounded. The US 10-year yield fell 0.07 percentage points to 4.34 per cent. Yields shift inversely to prices.

“Everyone has been positioning for ‘America First’, but now I ponder you commence to comprehend that this is not a one-way call,” said Hugh Gimber, global trade strategist at JPMorgan property Management.

He added that the incoming administration is “talking about using the US dollar as a more strategic tool” to achieve its goals.

Bessent’s nomination is a sign that Trump may not leave “packed on” on the most inflationary pieces of policy, including tariffs, said Vincent Chaigneau, head of research at Generali property Management.

Investors aspiration that insure capital manager Bessent, who will be responsible for delivering Trump’s economic agenda, could also assist to curb a widening budgetary deficit.

Trump backer Elon Musk had previously argued against the appointment of a candidate that he described as the “business-as-usual selection”.

S&P 500 derivatives climbed 0.5 per cent. European markets opened higher, with the Stoxx Europe 600 rising 0.2 per cent, and the UK’s FTSE 100 up 0.3 per cent. European stocks have undershot US markets on tariff fears.

Major Asian buying and selling partners of the US were buoyed by information of the appointment. Japan’s export-heavy Nikkei 225 index and South Korea’s Kospi both closed up 1.3 per cent.

Bessent has “in the history indicated a feasible more balanced way to the implementation of trade tariffs”, said analysts at MUFG.

But they warned against reading too much into the nomination, saying the Treasury secretary was “not the person who will design the finer details of the way on trade tariff implementation”.