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Dollar sags on Xi-Trump summit nerves, geopolitical worries

4/6/2017, 9:36:37 AMMarket Analysis
Dollar sags on Xi-Trump summit nerves, geopolitical worries

The dollar nursed losses against a basket of currencies early on Thursday, weighed down by caution over the impending U.S.-China summit and geopolitical concerns.

The dollar index against a basket of major currencies was down 0.15 percent at 100.410 (DXY).

It had risen to a three-week high of 100.850 overnight on an upbeat U.S. ADP private sector employment report.

But the currency tumbled from the three-week high despite hawkish-sounding minutes of the latest Federal Reserve meeting, which showed most policymakers think the central bank should begin trimming its $4.5 trillion balance sheet later this year.

"Although the contents of the Fed minutes should have been supportive for the dollar, it was dragged down by ensuing price action in other markets, which saw equities react negatively to the minutes and Treasury yields fall," said Shusuke Yamada, senior strategist at Bank of America Merrill Lynch (NYSE:BAC) in Tokyo.

Wall Street shares reversed an earlier rally and slipped on Wednesday.

"Geopolitical risks are also weighing on the dollar. The market is only starting to factor in recent developments regarding North Korea, and it now wants to figure out the geopolitical implications of the U.S.-China summit," Yamada said.

Regional tensions have risen after North Korea test-fired a ballistic missile on Wednesday, just a day before a summit between U.S. President Donald Trump and Chinese President Xi Jinping, where North Korea's arms development drive will take center stage.

Financial markets are nervous over the summit because of Trump's constant criticism of China's economic policies.

With the broader markets in a risk-averse mood, the Japanese yen gained on its perceived safe-haven status.

The dollar was down 0.3 percent at 110.390 yen , having slid from a high of 111.450 struck overnight.

The euro rose 0.2 percent to $1.0681 .

The pound added 0.1 percent to $1.2494 , after rising overnight on data showing growth in Britain's services sector.


The Australian dollar was steady at $0.7566 while the New Zealand dollar rose 0.2 percent to $0.6977 .