The announcement has sparked a rally in currencies worldwide, as investors hope that the hedge fund manager can moderate some of Trump's more radical economic stances.
According to CNBC, the U.S. dollar index, which compares the greenback to six major currencies, dropped 0.8% to 106.69 on Monday. This slight decline follows an impressive rally that began in late September. The euro emerged as a strong performer, climbing approximately 1% to trade at $1.0517 at 2:25 p.m. London time. Other currencies, including the Japanese yen, pound sterling, and Antipodean currencies, also gained ground against the dollar.
This global reaction follows the late Friday news that Trump intends to nominate Bessent, founder of the Connecticut-based investment firm Key Square Group, for one of the most influential roles in the U.S. government. The Treasury Department has extensive control over tax policy, public debt, and international finance.
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Market strategists view Bessent as a "safe pair of hands," a familiar figure in the market, and a more moderate choice compared to his competitors. The 62-year-old is expected to advocate for a softer approach to tariffs, deregulation to stimulate growth, and a reduction in deficit spending.
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Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted, "Trump's pick for Treasury Secretary has swelled investor sentiment further with stocks on Wall Street looking set for another flurry of gains." She added that Bessent's extensive experience navigating market fluctuations has boosted confidence in incoming pro-business policies and raised hopes that any tariffs would be highly targeted and potentially less inflationary.
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Trump's election victory earlier this month heightened concerns about potential price increases, leading strategists to reassess the outlook for global bond yields and currencies. Trump's promise to implement tax cuts and steep tariffs could stimulate U.S. economic growth, but it could also expand the fiscal deficit and reignite inflation.
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To increase revenues, Trump has proposed a blanket 20% tariff on all goods imported into the U.S., with a tariff of up to 60% for Chinese products and one as high as 2,000% on vehicles manufactured in Mexico. While many economists question the effectiveness of tariffs, Bessent has defended them as "a useful tool for achieving the president's foreign policy objectives." However, he has also advocated for a gradual implementation of tariffs.
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Analysts at Rabobank noted, "News that Scott Bessent is the top choice for incoming US Treasury Minister has raised the possibility that some 'Trump trades' may be watered down." They added that Bessent, a successful macro hedge fund manager, is associated with a preference to reduce the US budget deficit to 3% of GDP, suggesting less appetite for deficit spending.
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Bessent, a former employee of billionaire philanthropist and investor George Soros, has advocated for a "3-3-3" target, which refers to a plan to reduce the deficit to 3% by 2028, achieve 3% economic growth, and add 3 million new barrels of oil per day.
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Scott Spratt, a strategist at Societe Generale Corporate and Investment Banking, suggested that Bessent's nomination could be good news for Asian currencies in the coming months. He said, "The market view that Bessent is a 'safe hands' candidate, may see some relief rally in Treasuries from the open on Monday, as the risk of a more unorthodox candidate is priced out."
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However, not everyone is pleased with Trump's choice. Tesla CEO Elon Musk expressed disappointment, describing Bessent as a "business-as-usual choice" and stating that "business-as-usual is driving America bankrupt."
Bessent has also supported Trump's interest in the crypto industry, potentially making him the first Treasury chief openly in favor of crypto assets. Trump has previously pledged to make America "the crypto capital of the planet." This support was reflected in the market as Bitcoin surpassed the $99,000 level for the first time last week, as investors continue to anticipate Trump's return to the White House.
