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Dollar sags after Trump’s potshots

Reuters Share:

TOKYO (Reuters) – The dollar sagged against its major peers yesterday after US President Donald Trump and his top economics adviser took aim at the currency policies of key US trade partners, further raising concern that Washington was poised to actively weaken the greenback.
 
Mr. Trump and trade adviser Peter Navarro on Tuesday criticized Germany, Japan and China, saying the three key US trading partners were engaged in devaluing their currencies to US disadvantage.
 
“Every other country lives on devaluation,” Mr. Trump said. “You look at what China’s doing, you look at what Japan has done over the years. They – they play the money market, they play the devaluation market and we sit there like a bunch of dummies.”
 
The dollar fell 0.9 percent against the yen on Tuesday in the wake of Mr. Trump’s remarks, briefly touching a two-month low of 112.080. It pulled back a little to last trade at 112.705.
 
China’s offshore yuan rose about 0.4 percent overnight.
 
The euro was steady at $1.0803 following a one percent gain overnight when it scaled a seven-week peak of $1.0812.
 
The common currency received a boost after Mr. Navarro told the Financial Times that Germany is using a “grossly undervalued” euro to gain advantage over the United States and its own European Union partners.
 
“It is becoming clear that the Trump administration is one that will pursue a weaker dollar and criticize the currency policies of others,” said Shin Kadota, senior forex strategist at Barclays.
 
“Under such conditions, US yields and the dollar are losing their correlation. Any rise in yields resulting from monetary policy expectations will no longer be able to support the dollar as much.”
 
The dollar index against a basket of major currencies was up 0.1 percent at 99.556 after falling nearly one percent overnight to its lowest level since December 8.

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