Markets

Dollar recovers from a low set in motion by Trump comments

Currency trades up 0.48 per cent on the day having shed 0.6% on Wednesday

US president Donald Trump. said the currency was getting too strong and that he would prefer the Federal Reserve to keep interest rates low. Photograph: Olivier Douliery/Bloomberg

Thu Apr 13 2017 - 17:00

The dollar recovered from a two-week low against a broad index on Thursday, having slid after US president Donald Trump said the currency was getting too strong and that he would prefer the Federal Reserve to keep interest rates low.

The dollar and US Treasury yields took a heavy hit after Mr Trump's comments to the Wall Street Journal, in which he said the strength of the economy would hurt the dollar.

But after losing 0.6 per cent on Wednesday – its biggest one-day fall in over three weeks – the dollar recovered on Thursday, trading up 0.48 per cent on the day to 94 euro cent by lunchtime in Europe.

“This is a little bit of a correction of the move we saw overnight following the comments from Trump,” said Commerzbank currency strategist Thu Lan Nguyen, in Frankfurt.

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“Yes, it was negative what he said...but it’s not a big surprise – it wasn’t a U-turn in his rhetoric on the exchange rate so far. The question is: is he able to influence monetary policy in order to get a weaker dollar? That is still an open question.”

Trade rhetoric

Mr Trump’s comments broke with a long-standing practice of both US Democratic and Republican administrations refraining from commenting on policy set by the independent Federal Reserve.

It is also unusual for a president to talk about the value of the dollar, a subject usually left to the US treasury secretary. The comments were seen by markets as a fresh reminder of the president’s protectionist trade rhetoric, which has been a source of concern for dollar bulls.

“Bearing in mind the administration’s continued verbal intervention in the FX market, we think that any near-term rallies in the dollar could stay relatively limited, despite the Fed raising rates at a moderate pace,” said IronFX analyst Sakis Paraskevov in Cyprus.

Separately on Thursday, new data showed the number of Americans filing for unemployment benefits unexpectedly fell last week, suggesting the labour market remains strong despite a sharp slowdown in job growth in March.

- (Reuters)

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