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China stocks rise on Trump-Xi phone call

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Trump takes office at 1700 GMT

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Markets price 80% chance of BOJ rate hike this week

(Updates to Asia afternoon)

By Tom Westbrook

SINGAPORE, Jan 20 (Reuters) - The dollar drifted lower

and stocks were cautiously positive on Monday as investors

waited for an expected flurry of policy announcements in the

first hours of Donald Trump's second presidency and eyed a rate

hike in Japan at the end of the week.

Trump takes the oath of office at noon Eastern Time (1700

GMT), and promised a "brand new day of American strength" at a

rally on Sunday.

He has stoked expectations he will issue a slew of executive

orders right away and, in a reminder of his unpredictability,

launched a digital token on Friday, which soared above $70

before sliding to around $50 as traders turned uneasy.

Monday is a U.S. holiday, so the first responses to his

inauguration in traditional financial markets may be felt in

foreign exchange and then in Asian trade on Tuesday.

U.S. equity futures were a fraction weaker in the

Asia session while the dollar, which has rallied since September

on strong U.S. data and as Trump's ultimately successful

political campaign gained momentum, eased a fraction.

European and FTSE futures were broadly

flat. Japan's Nikkei rose 1.2%.

"My sense is a lot is in the price," said Nick Ferres, CIO

at Vantage Point Asset Management in Singapore.

"We are still running a low net equity exposure overall

because our sense is that the magnitude and speed of the rise in

yields and dollar is now challenging for equity valuations."

The dollar is up more than 8% on the euro since

September and at $1.0306 is not far from last week's two-year

high. But so much is priced in that some analysts feel a more

gradual start to U.S. tariff hikes may draw out some sellers.

Trump has threatened tariffs of as much as 10% on global

imports and 60% on Chinese goods, plus a 25% import surcharge on

Canadian and Mexican products, duties that trade experts say

would upend trade flows, raise costs and draw retaliation.

The Canadian dollar touched a five-year low of

C$1.4486 per dollar on Monday. The Mexican peso hit a

2-1/2 year low of 20.94 per dollar on Friday.

Bitcoin dipped in the early part of the Asian day but

remained above $100,000. Benchmark 10-year Treasury yields

closed out Friday at 4.61%, up nearly 100 basis points in four

months.

CHINA FOCUS

China is in focus as the target of the harshest potential

trade levies. Investors lately cheered better-than-expected

Chinese growth data and a Friday phone call between Trump and

Chinese President Xi Jinping that left both upbeat.

Hong Kong's Hang Seng rose 2.4% and China's yuan

rallied.

"Basically everyone is waiting for these trade negotiations

to begin and see what kind of attitude Xi Jinping takes with

Trump," Ken Peng, head of Asia investment strategy at Citi

Wealth told reporters in Singapore at an outlook briefing.

"That relationship between the two gentlemen has become very

important as a leading indicator of policies."

The yuan is seen likely to slowly adjust to any shifts in

trade policy and touched a two-week high of 7.3088 to the dollar

.

The Australian dollar, sensitive to trade flows and

China's economy, has scraped off five-year lows and, according

to Commonwealth Bank strategist Joe Capurso, could test

resistance at $0.6322 if Trump's policy changes fall short of

market expectations. It was last at $0.6214.

Japan's yen rallied last week as remarks from Bank

of Japan policymakers were taken as hints that a rate cut is

likely on Friday.

It was last slightly stronger at 155.97 per dollar and rates

markets priced about an 80% chance of a 25 basis point rate

hike.

In commodities, gold hovered at $2,706 an ounce and

Brent crude futures dipped on expectations Trump may

ease curbs on Russia's energy sector in return for a truce in

Ukraine.

(Editing by Stephen Coates)