Dollar near six-month lows amid Trump crisis
The dollar was trading close to six month lows against a basket of the other major currencies on Thursday, as an escalating U.S. political controversy continued to dominate market sentiment.
The dollar found some support after the Justice Department appointed a former FBI director as special counsel to investigate alleged Russian interference in November’s presidential election, as well as possible collusion by President Donald Trump’s campaign team.
The appointment of a special counsel comes after Trump fired James Comey, his FBI director who was leading a probe into Russia’s role in the election and reports that he attempted to interfere with the judicial process, leading to talk of possible impeachment.
The dollar has been hard hit by fears that the U.S. political system could become engulfed by crisis, preventing lawmakers from pushing through tax or spending reforms.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell as low as 97.28 overnight, its lowest level since November 9, having given up all the gains it had made following the election in November.
The index was at 97.56 by 08.07 GMT, up 0.23%.
The dollar index has now fallen more than 5% from its 14-year high of 103.82 set on January 3, as investors lost faith in the so-called ‘Trump Trade’.
A recent run of disappointing U.S. economic data, including inflation, retail sales and housing starts has also weighed on the dollar, tempering expectations for higher interest rates.
Odds for a June rate hike have dropped to around 60%, according to Investing.com’s Fed Rate Monitor Tool, down from more than 80% a week ago.
The dollar was close to three-week lows against the yen, with USD/JPY at 110.88, having ended the previous session down 2.03%, the largest one day decline since July 29 2016.
The yen showed little reaction to data showing that Japan’s economy grew by 2.2% year-over-year in the first quarter, ahead of economists’ expectations for growth of 1.7%.
The euro was slightly lower, with EUR/USD slipping 0.24% to 1.1132 after rising to six-month peaks of 1.1172 earlier.
USD/CHF hit a six-month trough of 0.9773 on Wednesday and last stood at 0.9799, up 0.15% on the day.
Sterling was a touch lower, with GBP/USD dipping 0.13% to 1.2954 ahead of a UK retail sales report, which is expected to give some insight into consumer sentiment amid Brexit developments.