Robust US data helps reverse dollar slide
- Author: Zachary Reyes May 24, 2017,
May 24, 2017, 15:32
The dollar stood near six-month lows against a basket of major currencies on Thursday as the USA political crisis appeared to deepen, and likely to delay any efforts by President Donald Trump to carry out his economic stimulus plans.
The dollar has given up all of its gain it made following Trump's election in November, and there's been a pull-back from record highs for world stocks points with investors uneasy about this week's headlines.
Recent U.S. data, which includes softer-than-expected retail sales and inflation, has raised concern about the strength of consumer sentiment.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.5 percent while Japan's Nikkei .N225 shed 0.4 percent. Earlier these were worries associated with the political situation in the European nation after the BREXIT and Canada planning to move out of the European nation and also issues in North Korea. Hong Kong's technology sector, for example, is the most expensive, trading at a price-to-earnings multiple of more than 42 times.
The US administration continues to weigh down the greenback with Trump's bold statements, while Asian stocks remain under enormous constraint from geopolitical conflicts brought by the nuclear activity and investors looking to yen as their safe-haven.
That was followed late Tuesday by claims from recently-fired Federal Bureau of Investigation boss James Comey that Trump pressed him to drop a probe into ex-national security adviser Michael Flynn over his links to Moscow.
This follows a week of turmoil at the White House after Trump fired Comey and then discussed sensitive national security information about Islamic State with Russian Foreign Minister Sergei Lavrov.
The White House quickly denied the New York Times report, saying in a statement it was "not a truthful or accurate portrayal of the conversation between the president and Mr. Comey".
Trump's economic proposals - slashing taxes, cutting regulation and pumping up infrastructure spending - lifted the U.S. dollar after the election because many thought they could give the American economy a shot in the arm.
The yen, which saw its biggest daily gain against the dollar since July on Wednesday, had touched a more than three week high JPY=.
US stock market declines accelerated in afternoon trading, and major USA indexes ended near session lows.
The euro also caught a bid, spiking higher as the latest Trump-Comey news filtered in late Tuesday in the US.
Against that backdrop, the dollar dropped 2.09 per cent against the yen on Wednesday, its biggest fall since July 29 a year ago.
On the other hand, USA economic data published on Tuesday was mixed, raising more doubts about some rosy views on the US economy. The dollar bought 112.30 yen, well down from levels above 114 yen seen last week. "There has been a lot of focus on the USA president who admitted that he did share information with Russian Federation", said Greg McKenna, chief market strategist at AxiTrader. The New York Federal Reserve's barometer on business activity in the state unexpectedly fell in May, sinking into negative territory for the first time since October."I think people want to wait and see", said Teppei Ino, analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore.
"That is going to be easier said than done, it appears, with US production running at its fastest pace since August 2015 and data yesterday confirming that Chinese growth momentum continues to moderate", ANZ strategists wrote in a daily note.
The dollar got a boost in afternoon trading from a spike higher in U.S. Treasury yields that coincided with session highs in U.S. stocks, which rebounded from their worst day in more than eight months.