On Trump's inauguration day, the US dollar weakened. The market is concerned about the prospects of tariff policies.

According to analysis from Bank of America Global Research, the US dollar showed weakness on President Trump's inauguration day and continued to be under pressure on Tuesday. This is mainly due to Trump not declaring a "trade deficit emergency" in his inauguration speech and not immediately implementing new tariffs, leading to a partial reduction in the market's risk premium on the US dollar. In a report on interest rates and exchange rates released on Tuesday, Bank of America pointed out that due to the lack of a clear timeline for tariff increases by the Trump administration, there is still a certain level of uncertainty in the market. "Even if the tariff policy is delayed, it could still become an important policy pillar of the new government." Investors are closely monitoring Trump's tariff policy to assess the potential impact on US and international economic growth and inflation. Bank of America tracks the gap between the US dollar and the implied level of its interest rate differential. Interest rate differentials are an important fundamental driver of the US dollar trend, with investors typically preferring currencies with higher or rising yields. The current strength of the US dollar exceeds what can be explained by interest rate differentials, which the market interprets as reflecting "tariff risk premium." The dollar's decline on Monday reflected the partial unwinding of the risk premium, but the market still retains some tariff risk premium. As of Tuesday afternoon, the ICE US Dollar Index (DXY) fell by 1.2%, accumulating a decline of about 0.4% since the beginning of the year. Nevertheless, the dollar has still risen by approximately 4.6% in the past 12 months. Bank of America's global research strategist warns that recent selling of the dollar could trigger unwinding risks for commodity trading advisors (CTAs) as the dollar approaches CTA stop loss levels. However, UBS Global Wealth Management stated in a report on January 14th that they expect the dollar to maintain "longer-term strength" in the first half of 2025, due to the strong economic activity in the US and concerns about tariffs in other global regions. In his inauguration speech, Trump announced national emergencies at the southern border and in energy, but did not mention any new tariff measures. He later told reporters in the Oval Office that his administration is considering imposing a 25% tariff on Mexico and Canada starting from February 1st. Meanwhile, the US stock market generally rose on Tuesday afternoon, with the Dow Jones Industrial Average rising by 1.24%, the S&P 500 rising by 0.88%, and the Nasdaq Composite rising by 0.64%. In the bond market, the yield on the 10-year US Treasury bond fell by about 4 basis points to 4.57%, while the yield on the 2-year Treasury bond remained steady at 4.28%.