On January 24, the U.S. dollar fell to a one-month low, driven by renewed optimism surrounding U.S.-China trade relations and calls for lower interest rates by President Donald Trump. The dollar index decreased by 0.7%, reflecting market sentiment following Trump's softer stance on potential tariffs during discussions with Chinese President Xi Jinping.
The onshore Chinese yuan appreciated by 0.6% against the dollar, reaching its highest level in eight weeks, marking its best weekly performance since September. Additionally, major Chinese stock indexes closed over 0.7% higher.
Emerging market currencies generally strengthened, with MSCI's index for these currencies rising by 0.5%, poised for its best week in over a year. Mexico's peso increased by 0.6%, adding to a 2.5% gain recorded earlier in the week.
In a speech at the World Economic Forum in Davos, Trump also urged for immediate reductions in interest rates, suggesting that other nations should follow suit. This call comes amid concerns over prolonged high interest rates in the U.S., which had previously strengthened the dollar and U.S. Treasury yields.
In contrast, the Turkish lira continued to struggle, trading at record lows, exacerbated by expectations of a significant interest rate cut by the central bank. South Africa's rand rose by 0.8%, achieving a one-month high, while its stock index gained 1.2%.
Overall, emerging market currencies showed resilience amid fluctuating global economic conditions, with analysts noting that Trump's comments may signal a shift in protectionist policies.