By James Glynn 
 

SYDNEY--The U.S. dollar weakened against a wide range of currencies in Asia on Monday amid disappointment that U.S. President Donald Trump's inauguration speech proved light on detail over his plans for economic stimulus.

Mr. Trump spent more time on themes that might stoke trade tensions, an outcome that could pose a threat to a recovery in global economic growth, traders said.

"At the turn of the year, the U.S. dollar was priced for strong growth and rising yields. Now the pendulum is swinging towards trade wars and slower growth," said Sean Callow, currency strategist at Westpac.

The dollar slumped against the yen, sliding to around Y113.75 from Y115.20 in late New York trading Friday. The euro rose to $1.0730, its highest level since December. The Australian dollar was trading around its highest levels since Nov. 11. The British pound remained firm, having climbed 2.8% in the last five trading days.

China guided the yuan stronger for the first time in three sessions, moving its daily midpoint for onshore markets to CNY6.8572 from CNY6.8693 on Friday.

At 0130 GMT, the WSJ Dollar Index, a measure of the U.S. currency against 16 others, was down 0.26% at 91.33.

In a relatively brief inauguration speech, Trump spent a lot more time on protectionist rhetoric than on the infrastructure boost that has been vital to the U.S. dollar rally since election day, Mr. Callow said.

"Trump's stated preference for a weaker dollar and his intense focus on U.S. trade, clashes with the promised 4% growth rate that would send yields and the U.S. dollar sharply higher," he said.

Mr. Trump is taking immediate steps to reorder U.S. economic alliances in his first days in office, setting up meetings with leaders from Mexico and Canada on North American affairs and hosting U.K. Prime Minister Theresa May this Friday to lay the groundwork for a trade pact with London.

Just two days after taking office, Mr. Trump said he would follow through on plans to renegotiate the North American Free Trade Agreement, the two-decade-old deal that binds the U.S. economy to Canada and Mexico.

The U.S. dollar is likely to continue trading softer at the start of the week "as the market unwinds expectations of an immediate fiscal stimulus from the new U.S. administration," said Rodrigo Catril, currency strategist at National Australia Bank.

U.S. Treasury yields are leading moves in the currency market. "Caution is the theme for the week as the market will be very susceptible to Trump's team policy announcements," Mr. Catril added.

Even ahead of Mr. Trump's speech, investors had been dialing back their bets on dollar strength, with leveraged funds cutting their long-dollar positions by $2.1B to $26.7B in the week through Tuesday, according to the latest CFTC data and ANZ research.

The faltering of initial post-election confidence over the U.S. growth outlook has taken pressure off emerging market currencies this month, traders said. But gains will be limited by the confidence in the U.S. economic outlook being shown by the U.S. Federal Reserve.

If the Fed follows through on its optimistic rhetoric by raising rates by mid-year, then emerging market currencies could have the worst of both worlds--a strong U.S. dollar driving capital outflows, but the possibility of U.S. protectionism hampering Asian exporters, analysts said.

-Saumya Vaishampayan contributed to this article.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

January 22, 2017 21:20 ET (02:20 GMT)

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