Dollar edges up, on track for weekly gain, quarterly loss

Cornelia Mascio
Aprile 2, 2017

The dollar edged up in Asian trading on Friday, poised for weekly gains after solid USA economic data contrasted with figures showing euro zone inflation cooling.

The euro was a touch lower at $1.0760 EUR=, having drifted down from a 4-1/2-month high of $1.0906 scaled on Monday. The dollar index, which tracks the US currency against a basket of six major rivals, was up 0.1 percent at 100.50, up 0.9 percent for the week and not far from a two-week high of 100.60 hit overnight.

The common currency had dropped about 0.5 percent overnight following a report by Reuters that European Central Bank policymakers were wary of changing their policy message after tweaks this month had raised expectations of the central bank ending its super-easy policy and eventually hiking interest rates. The euro was lower 0.3 percent on the day at $1.07835.

The euro had already been trading lower thanks to data released earlier in the day that showed German and Spanish consumer inflation slowed more sharply than expected in March, prompting worries that sluggish growth in the euro zone could persist. "I think the reason you didn't see more substantial dollar strength is concerns on the lack of conviction that our new president had in getting ACA repealed".

Commerce Secretary Wilbur Ross told reporters that one of the orders directs his department and the U.S. Trade Representative to conduct a major review of the causes of U.S. trade deficits, including "currency misalignment".

"Most of the market thought that the dollar had gotten too undervalued after last week and were just waiting for it to bounce", said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

As the conditions to be labelled a currency manipulator are subjective, USA officials could tweak their definition so that it even included countries like South Korea and Japan, he said. It has since recovered nearly 1 percent and last stood at 111.15 yen, flat on the day.

Japan's business year ends on Friday.

The healthcare stumble raised doubts that Trump would be able to carry out his fiscal stimulus and tax cuts, and pressured the dollar to 110.11 yen JPY= , its lowest since November 18.

Meanwhile, Bloomberg reports that the rand reversed the deepest declines in emerging markets yesterday and government bonds snapped four days of losses after three of the top six officials in the ruling party were said to oppose President Jacob Zuma's plan to dismiss Finance Minister Pravin Gordhan.

British Prime Minister Theresa May formally began Brexit proceedings on Wednesday, launching a two-year negotiation process before the divorce comes into effect in late March 2019.

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