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Thursday 15:30 GMT
What you need to know
● Dollar index moves down towards 100 after Trump says buck too strong
● Treasury yields hit five-month trough after US president argues for low rates
● S&P 500 steady as investors absorb bank earnings reports
● Gold gives back early gain
● Brent holds near $56 a barrel after US stockpiles fall
Forex traders are reassessing the dollar’s value after President Donald Trump said the US currency was “getting too strong” in an interview published on Wednesday.
The buck weakened sharply on the news and is currently a bit firmer but struggling to recover those losses on Thursday. The dollar index, which tracks the greenback against a basket of its peers, is hovering at 100.49, near its lowest since March 30 having shed about 1 per cent so far this week.
Mr Trump also said he was unlikely to label China a currency manipulator — as he had promised to do in his election campaigning — and added that he preferred a low interest rate policy, just several months after complaining the Federal Reserve was keeping monetary policy artificially loose.
Some analysts felt Mr Trump’s comments could weigh on the dollar for the longer term.
“Backing down from some of the hardline promises from the campaign on trade and offering support for diluted measures on taxes should further the market narrative that the administration is now less likely to deliver on some of the policies which were expected to support the USD [US dollar],” said Todd Elmer, strategist at CitiFX.
“This suggests more downside for USD, although with the French election looming and continued concerns on geopolitics, we would not be surprised if it has a more risk-off flavour.”
Mr Trump’s statements also are helping to put more downward pressure on government bond yields, which move opposite to prices. The yield on the 10-year Treasury is down to 2.26 per cent, near its lowest in five months, while equivalent maturity German Bunds, which are also benefiting from haven flows ahead of the French general election, are easing 1 basis point to 0.19 per cent.
The more monetary policy sensitive US 2-year bond yield is down to 1.22 per cent, near its lowest since the end of February, as futures markets, according to the CME FedWatch tool, cut the chances of a Fed rate rise in June from about 67 per cent a week ago to 51 per cent.
What to watch
Wall Street stocks have been consolidating since hitting a record high at the start of March, with many investors wanting to see that corporate profitability and outlook can justify current valuations.
The CBOE Vix index, an option-based measure of implied S&P 500 volatility known as Wall Street’s fear gauge, is down 2.2 per cent to 15.42, after earlier hitting its highest in five months.
In the event, the banks beat analysts’ earnings-per-share expectations but are receiving mixed responses from investors, leaving the S&P 500 flat at 2,345.
The dollar’s retreat has been broad over the past 24 hours, though momentum for many of its peers has faded throughout the current session.
The euro, after hitting a one-week high of $1.0677, is down 0.4 per cent on the day at $1.0626 and sterling is 0.1 per cent softer at $1.2527.
The Australian dollar shot higher following the morning release of solid jobs data, and is notching a rise of 0.9 per cent to US$0.7596.
One of the more notable movers is the Japanese yen. In Asian trading it touched ¥108.70 per dollar, its strongest level since mid-November, and though it has weakened to trade off 0.2 per cent to ¥109.22, this came too late to stop the exporter-sensitive Japanese stock market from taking a hit.
Tokyo’s Topix lost 0.8 per cent amid broad weakness across Asia.
In Sydney the S&P/ASX 200 index fell 0.7 per cent, as resources groups struggled, while in Hong Kong the local currency’s dollar peg did few favours for local stocks, as the benchmark Hang Seng index lost 0.2 per cent.
The Shanghai Composite on the Chinese mainland was up less than 0.1 per cent.
In Europe, the Stoxx 600 index is slipping 0.3 per cent and London’s FTSE 100 is also down 0.3 per cent as the stronger pound is seen hurting the blue-chip index’s foreign currency earners. Miners are struggling after iron ore prices fell to five-month lows and banks are wilting as lower bond yields are seen crimping lending margins.
Crude oil prices are steady after giving up gains late in the day on Wednesday, a dip that came despite news that US oil inventories fell by 2.2m barrels, according to the Energy Information Administration. Analysts had expected a small increase.
Brent crude, the international benchmark, is up less than 0.2 per cent to $55.95 a barrel, having hit a five-week high of $56.65 at one stage in the previous session. West Texas Intermediate, the main US contract, is up 0.4 per cent at $53.34.
Gold is down 0.2 per cent to $1,283 an ounce. The bullion, which tends to thrive on a lower dollar and falling bond yields, touched a five-month high of $1,288 earlier on Thursday.
Additional reporting by Hudson Lockett in Hong Kong
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