Asian dealers resume dollar-selling after Trump rally
The dollar edged back down in Asia yesterday as a Donald Trumpinspired surge petered out with analysts tipping the US unit to continue weakening.
The resumption in the greenback’s sell-off reversed early gains in Tokyo, which ended down for a third day, though Hong Kong surged to new peaks in mixed equity trade.
Forex markets have been on a rollercoaster ride the past few days after US Treasury Secretary Steven Mnuchin sent the dollar spiralling to multi-year lows by saying at the Davos meeting of business and political leaders that a weaker unit was “good for us”. That came as Commerce Secretary Wilbur Ross defended this week’s stinging US tariffs on solar panels and warned of further retaliation against nations Washington felt had broken the rules, ramping up fears of a possible global trade war.
Traders rushed back into the greenback, though, after Trump, who arrived at the Swiss resort on Thursday, restated traditional US policy of favouring a strong dollar and said Mnuchin’s comments were taken out of context.
“You tend not get too many comments on the dollar’s value from either treasury secretaries or presidents; it’s a rare event,” Shahab Jalinoos, global head of foreignexchange strategy at Credit Suisse, told Bloomberg News. “So the market tends to pay attention when they do happen. The market can easily imagine the idea that this White House might well change its stance on the currency.”
However, the recovery soon faded and dollar selling resumed, with the euro heading back to its three-year highs, helped by European Central Bank boss Mario Draghi showing little concern about the effect of a stronger unit on the eurozone.
But Draghi did voice concern over the “volatility” in currency markets. He spoke after the ECB left its bond-buying stimulus for the eurozone in place.