Dollar steady, unfazed by Trump address
The dollar held steady against its peers on Wednesday, showing little reaction to U.S. President Donald Trump’s State of the Union address which touched upon trade and budget issues but provided investors with few surprises.
In an annual speech on Tuesday outlining his priorities for the coming year, President Trump said that illegal immigration was an urgent national crisis and reiterated his vow to build a border wall.
Trump also said any trade agreement with China “must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.”
The dollar index against a basket of six major currencies was little changed at 96.072, after briefly touching a near two-week high of 96.135.
“Trump’s address did not contain surprises. He did not, for example, declare a state of emergency (over border funding) nor make surprising comments about China,” said Ayako Sera, senior market economist at Sumitomo Mitsui Trust.
“The fall by the Australian dollar appears to have generated more attention,” Sera added.
The Australian dollar tumbled after central bank chief Philip Lowe opened the door to a possible rate cut after more than a year of signaling tighter future policy.
In his first public speech of the year, Lowe said rates could go in either direction, depending on the labor market and inflation.
The Aussie dollar was last down 1 per cent at $0.7165.
The Reserve Bank of Australia has left its official cash rate at a record low of 1.50 per cent since August 2016 and Governor Lowe had repeatedly emphasized the next move was more likely to be up.
The euro was little changed at $1.1400 after slipping 0.25 per cent the previous day to its lowest since Jan. 28.
The single currency was pressured after a survey released on Tuesday showed euro zone businesses expanded at their weakest rate since mid-2013 at the start of the year.
The dollar edged down 0.15 per cent to 109.78 yen after posting a gain of 0.4 per cent overnight.
While the Japanese currency’s big gains against the downtrodden Aussie was seen as a factor weighing on dollar/yen, the greenback stayed in reach of a five-week peak of 110.165 yen reached on Monday.
The dollar has been managed to hold its ground although U.S. Treasury yields declined the previous day and pulled back from one-week highs.
“The dollar is managing to draw support in spite of lower Treasury yields thanks to a combination of a dovish-sounding Federal Reserve and U.S. data, which has been relatively strong on the whole recently,” said Shusuke Yamada, chief Japan FX and equity strategist at Bank Of America Merrill Lynch.
The Australian dollar was down more than 1 per cent at 78.66 yen.
The pound remained on the back foot following a slump overnight. The currency was a shade lower at $1.2950 after brushing $1.2923, its lowest since Jan. 22.
Sterling had lost nearly 0.7 per cent on Tuesday on a weak Purchasing Managers’ Index data and uncertainty about Brexit talks.
UK cabinet ministers have secretly held talks on plans to delay Brexit by eight weeks, the Telegraph newspaper reported late on Tuesday.
The delay would postpone Brexit to May 24. Currently, Britain is due to leave the European Union on March 29. (Reuters/NAN)
