By Nell Mackenzie
LONDON (Reuters) -The dollar fell broadly on Monday, while European stocks jumped, after an official for the incoming U.S. administration said President-elect Donald Trump would stop short of imposing tariffs at his inauguration, which takes place later in the day.
European equity markets were firmly in positive territory in afternoon trading after the Wall Street Journal reported Trump would not impose import tariffs immediately after he's sworn in later on Monday.
The pan-European STOXX 600 rose 0.3%, with the region's main indices all up roughly 0.5%. MSCI's All-World index was last up 0.4%.
The dollar tumbled by as much as 1.3% at one point, falling particularly hard against the currencies of the United States' largest trading partners, such as the Canadian dollar, the Mexican peso, the euro and China's yuan.
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 of an immediate slew of executive orders 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 financial markets may be felt in foreign exchange and then during Asian trade on Tuesday.
Euro zone bond yields steadied by 1518 GMT.
"In the last two weeks we have seen two conflicting views from the new administration - the hard-liners on tariffs and those who favour a more market-friendly approach," Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said.
"So, this perception that the door is open to negotiations is important. But it doesn't tell us where we will end and I will be waiting for details on the scope of tariffs, which sectors will be impacted," he said, adding: "The fact that he might be choosing a gradual approach is an encouraging sign."
The dollar fell 1.15% against the Canadian dollar to C$1.4319 and dropped 1.4% against the Mexican peso.
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 yuan itself strengthened sharply in the offshore market, leaving the dollar down almost 1% on the day at 7.274.
The Australian dollar, which can serve as a more liquid proxy for the Chinese currency, rose 1.2% on the day to $0.6262. The euro, meanwhile rose 1.3% on the day to $1.0401, set for one of its largest one-day rally since late 2023.