The potential impact of Trump's Treasury secretary nominee on global financial markets.

• Scott Bessent, the founder of Key Square Group, is viewed as a "safe pair of hands" by strategists.
• The 62-year-old will urge Trump to adopt a softer stance on tariffs, ease regulations to stimulate economic growth, and reduce government spending to balance the budget.
• According to Rabobank analysts, the possibility of watering down some "Trump trades" has arisen due to the news that Scott Bessent is the top choice for the incoming US Treasury Minister.

On Monday, financial markets embraced President-elect Donald Trump's choice for U.S. Treasury secretary, Scott Bessent, causing currencies worldwide to surge in anticipation that the hedge fund manager could temper Trump's more radical economic views.

On Monday, the dollar index, which compares the greenback to six major currencies, dropped 0.5% to 107.01, moderating some of its recent advancements following a remarkable surge since late September.

The stock reached the top, increasing by 0.7% to trade at $1.049 at 12:50 p.m. London time. Additionally, the Japanese yen, pound sterling, and Antipodean currencies were also trading higher against the dollar.

Bessent's nomination to lead the Treasury Department, which has broad oversight of tax policy, public debt, and international finance, was met with reactions from global investors following Trump's announcement on Friday.

Bessent, the founder of Key Square Group, is viewed as a "safe pair of hands" by strategists, who consider him a well-known market participant and a more moderate choice compared to some of his competitors.

The 62-year-old will urge Trump to adopt a softer stance on tariffs, ease regulations to stimulate growth, and aim for a reduction in deficit spending.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, stated in a research note that Trump's Treasury Secretary pick has boosted investor sentiment, causing stocks on Wall Street to look set for another surge in gains.

Scott Bessent, a hedge fund manager with a long history of navigating market fluctuations, has increased confidence in incoming pro-business policies and raised hopes that any tariffs would be highly targeted and potentially less inflationary, according to her.

A 'layered' approach to tariffs

The election of Trump earlier this month increased worries about rising prices, causing strategists to revise their expectations for global bond yields and currencies.

There is a belief that Trump's plan to implement tax cuts and high tariffs may stimulate the U.S. economy, but it could also increase the budget deficit and stoke inflation.

Trump has proposed imposing a 20% tariff on all imported goods into the U.S., with a maximum tariff of 60% for Chinese products and up to 2,000% on vehicles built in Mexico to increase revenues.

Bessent has defended tariffs as a useful tool for achieving the president's foreign policy objectives, but has also called for them to be layered in gradually.

According to Rabobank analysts, the possibility of watering down some "Trump trades" has arisen due to the news that Scott Bessent is the top choice for the incoming US Treasury Minister.

"Bessent, a successful macro hedge fund manager, is known for preferring to reduce the US budget deficit to 3% of GDP, which indicates a lower tolerance for deficit spending," they stated.

Bessent, a former employee of billionaire philanthropist and investor George Soros, has endorsed a "3-3-3" strategy, which entails reducing the deficit to 3% by 2028, attaining 3% economic growth, and increasing oil production by 3 million barrels per day.

Business as usual?

Some strategists anticipate that Trump's Treasury chief selection will be viewed as positive for Asian currencies in the near future.

According to Scott Spratt, strategist at Societe Generale Corporate and Investment Banking, the market view that Bessent is a 'safe hands' candidate may lead to a relief rally in Treasuries on Monday as the risk of a more unorthodox candidate is priced out.

He believes that the "layered" approach to tariffs, with initial levels being "maximalist" positions, could positively impact the opening boost to Asia FX, including the Chinese yuan.

Elon Musk expressed disappointment in nominating Bessent as Treasury chief, stating in a social media post via X on Nov. 16 that Bessent is a "business-as-usual choice" and that "business-as-usual is driving America bankrupt."

Bessent, who has been an advocate of Trump's embrace of the crypto industry, could soon become the first Treasury chief openly in favor of crypto assets. Trump has previously pledged to make America "the crypto capital of the planet."

Last week, Bitcoin surpassed the $99,000 mark for the first time as investors anticipate Trump's return to the presidency.