U.S. dollar fall on rising concerns over Trump

Jay Anderson
May 19, 2017

The US dollar wallowed near six-month lows against a basket of major currencies on Thursday (May 18) as the US political crisis appeared to deepen, and likely to delay any efforts by President Donald Trump to carry out his economic stimulus plans.

Some traders said Wednesday's selling was sparked by reports that President Donald Trump had allegedly asked then-FBI Director James Comey to back off the investigation of former national security adviser Michael Flynn, which prompted some congressional Republicans to call for further investigation.

Market demand for safe-haven currencies soared on Wednesday, with Japanese yen rising over 1.8 percent against the dollar during the session.

The dollar index, which tracks the greenback against six major rivals, fell as low as 97.333 .DXY on Wednesday, its lowest level since Nov. 9, having given up all the gains it had made following the us presidential election in November.

The dollar index rose 0.02 percent, with the euro down 0.29 percent to $1.1126. [O/R] USA crude CLc1 was effectively flat at $49.04 a barrel.Gold hovered near a two-week high thanks to the weaker dollar and the risk aversion gripping the broader markets.

The dollar eased 0.1 percent to 111.39 yen JPY=, having set a three-week low of 110.24 yen on Thursday.

A drop in global oil prices that went along with weaker stock markets hurt commodities-linked currencies including the Canadian dollar CAD= and the Norwegian crown NOK= down by 0.3 and 0.7 percent respectively against the greenback.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.4 per cent.

The euro broke above $1.11 to an extent not seen since November, while the yen is also increasing pressure on the U.S. unit.

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Wall Street was 0.2 percent lower in early NY business, adding to Wednesday's sharp sell-off. The U.S. Energy Information Administration said U.S. crude inventories fell 1.8 million barrels for the week to May 12, less than the 2.4 million barrels that had been forecast.

The dollar, two- to 10-year Treasury yield curve and yields on 10-year Treasury Inflation-Protected Securities (TIPS) are all back where they were before Trump was elected in November. It spent most of the day hovering near $1.2950 after an initial dip following United Kingdom wage and jobs numbers before retreating to $1.2942 by 1600 GMT, still up 0.2 percent on the day.

In addition, economic data published Tuesday cast more doubt on some rosy views about the U.S. economy.

The Nasdaq had its worst day since June 24. Secondly, and more drastically, it could actually lead to the impeachment of the sentient Wotsit, an eventuality that would completely erase the foundations of the market's recent record highs. Brent crude, used to price global oils, gained 56 cents, or 1.1 percent, to close at $52.21 per barrel in London.

Gold fell on Thursday as a bounce in the dollar prompted some buyers to cash in gains after its biggest one-day rally in almost a year, though uncertainty over the outlook for the Trump presidency underpinned the metal near two-week highs.

The Canadian dollar was little changed against its USA counterpart on Thursday, as higher oil prices offset broader gains for the greenback.

Investors piled into assets they perceive as havens, sending gold up 1.8% to $1,257.50 an ounce, its largest one-day gain since March 16.

June 2017 3-year bond futures contract at 98.21 (implying a yield of 1.79pct), unchanged from Wednesday.

"There is no recession in the pipeline, but the USA economy could slow next year", said Didier Borowski, head of macroeconomic research at Amundi, Europe's largest asset manager with 1.27 trillion euros of assets.

Other reports by BadHub

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