Oman Daily Observer

Dollar unsettled, stocks subdued by Trump’s policy

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SYDNEY: The dollar struggled in Asia on Tuesday as US President Donald Trump’s focus on protection­ism ahead of fiscal stimulus fuelled suspicions his administra­tion might be content to gain a competitiv­e advantage through a weaker currency.

The talk of trade wars came even as more data pointed to a welcome revival in activity worldwide.

A survey of Japanese manufactur­ing out on Tuesday showed the fastest expansion in almost three years as export orders surged. Instead the uncertaint­y emanating from Washington kept Asian stocks subdued while aiding safe-haven Treasuries and the yen.

MSCI’s broadest index of AsiaPacifi­c shares outside Japan edged up 0.4 per cent, while Shangahi was flat and the Nikkei slipped 0.4 per cent.

Spread betters pointed to a hesitant opening for European bourses while E-mini futures for the S&P 500 were a fraction softer.

Sentiment took an early knock when US Treasury Secretary nominee Steven Mnuchin told senators that he would work to combat currency manipulati­on but would not give a clear answer on whether he views China as manipulati­ng its yuan.

In written answers to a Senate Finance Committee, Mnuchin also reportedly said an excessivel­y strong dollar could be negative in the short -term.

The dollar duly skidded as far as 112.52, breaking last week’s trough and the lowest since late November, before steadying at 112.86.

Its 1.7 per cent loss on Monday was the largest since July 29.

Against a basket of currencies, the dollar index was down 0.1 per cent at 100.080, while the euro hopped up to $1.0756. Both were levels last seen in early December.

Sterling briefly hit a six-week peak at $1.2546 on speculatio­n that Britain’s Supreme Court would rule on Tuesday that the government needs parliament­ary approval to trigger formal Brexit talks.

While Trump promised huge cuts in taxes and regulation­s on Monday, he also formally withdrew from the Trans-Pacific Partnershi­p (TPP) trade deal and talked of border tariffs.

“It’s interestin­g that markets did not respond positively to a reaffirmat­ion of lower taxes and looser regulation, reinforcin­g the impression that all the good news is discounted for now,” wrote analysts at ANZ in a note.

“As week one in office gets underway, there is a growing sense of scepticism, not helped by the tone of Friday’s inaugural address and subsequent spat with the media.”

Doubts about exactly how much fiscal stimulus might be forthcomin­g helped Treasuries rally.

Yields on 10-year notes eased to 2.39 per cent, having enjoyed the steepest single-day drop since January 5 on Monday. Two-year yields were at 1.16 per cent, narrowing the dollar’s premium over the euro to 183 basis points from a recent top of 207 basis points.

Wall Street lost just a little of its recent gains. The Dow Jones fell 0.14 per cent, while the S&P 500.

SPX lost 0.27 per cent and Nasdaq 0.04 per cent.

Shares in Qualcomm Inc dived almost 13 per cent after it was sued by Apple on Friday. The drop in the dollar boosted industrial metals including copper and iron ore, while gold was near two-month high at $1,216.65 an ounce. the

 ?? — Reuters ?? A trader wearing a Trump hat works at the New York Stock Exchange (NYSE) in Manhattan, New York City, US.
— Reuters A trader wearing a Trump hat works at the New York Stock Exchange (NYSE) in Manhattan, New York City, US.

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