Dollar slides after Trump hits out at ‘devalued’ currencies

The Trump administration upped the tension in currency markets on Tuesday with remarks suggesting Japan, China and Germany were benefiting from weaker currencies, comments that pushed the US dollar to a two-month low overnight.

"Every other country lives on devaluation," President Donald Trump said at a meeting with US pharmaceutical executives. "They play the devaluation market and we sit there like a bunch of dummies."

Separately, a US trade adviser told the Financial Times that Germany was using a "grossly undervalued" euro to gain an advantage over trading partners, including the US

The comments sent the dollar sliding down against the yen, euro and other rivals, and prompted responses from officials in Germany and Japan, who rebutted the claims.

The US dollar fell more than more than 1% to ¥112.08 overnight, its lowest level since Nov. 30, but regained some ground Wednesday morning as some currency traders saw a chance to buy on a dip. The dollar was changing hands at ¥113.05 around 0300 GMT.

The euro remained stronger at $1.0797 in midday Asia trade after hitting $1.0811 overnight, its highest since Dec. 8. The WSJ Dollar Index, a measure of the US dollar against a basket of 16 major currencies, was up 0.11% at 90.59.

Chief Cabinet Secretary Yoshihide Suga, Japan's top spokesman, said that the nation's monetary policy was "not targeting exchange rates but is aimed at attaining a domestic price target" of 2% inflation, echoing similar remarks made by Bank of Japan Governor Haruhiko Kuroda the previous day.

Mr. Suga reiterated Japan's commitment to adhere to the principles of the Group of 20 economic powers that the countries should refrain from competitive devaluations and would not target their exchange rates for competitive purposes.

Separately, Japan's Prime Minister Shinzo Abe said he wanted to explain to Mr. Trump "how much Japan is contributing to raising the competitiveness and productivity of US industries" when they meet in Washington on Feb. 10.

Mr. Abe also said he wanted to discuss trade with the US leader "within a broader context of how Japan can contribute to US job creation and proposed infrastructure investment."

Sean Callow, senior currency strategist at Westpac, said the comments come on top of rising tension over a shift in US policy toward protectionism.

"It is increasingly clear that the Trump administration views any large bilateral trade deficit as the result of the US being cheated. As such, Germany is joining China on the trade hit list and will surely stay there," Mr. Callow said.

German Chancellor Angela Merkel also rejected the claims at a news conference Tuesday. (WSJ)