Dollar down on trade war fears
THE DOLLAR hovered near a 14-month low against the yen yesterday as investors grew cautious about the outlook for the greenback after a top economic adviser to the Trump administration resigned, stoking fears of a trade war.
Market watchers said the departure of economic adviser Gary Cohn, a former Wall Street banker, would embolden protectionist forces in the US administration as Trump tries to impose hefty tariffs on steel and aluminium.
“The resignation of Cohn may be all the confirmation global markets need that the US administration’s protectionist policy agenda is more than just a political show,” ING strategists wrote in a daily note.
The dollar tumbled 0.4 percent to ¥105.45 (R11.85), its lowest level since Monday and within touching distance of a 14-month low of ¥105.24 hit last Friday.
Against a basket of currencies, the dollar was a shade lower at 89.56.
Cohn’s departure is the latest in a series of steps taken by the Trump administration to assert protectionist policies.
These steps have included withdrawing the US from the TransPacific Partnership, instigating a renegotiation of the North American Free Trade Agreement and imposing hefty import tariffs on some targeted products.
“The voices of reason in the White House are dwindling, and the risk of a trade war is increasing,” Commerzbank strategists wrote in a daily note.
Market watchers such as HSBC said the escalation of the trade-war rhetoric would lead to a lower dollar as the markets focus on the structural weaknesses of the US deficits, but that could spread to a weakness in emerging-market currencies if a trade war escalates.
The euro was broadly flat on the day. – Reuters/African News Agency (ANA)