FOREX-Dollar steadies as
investors eye Trump speech
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[February 27, 2017]
By Jemima Kelly and Ritvik Carvalho
(Reuters) - The dollar edged up from a 2-1/2-week low against the yen on
Monday but struggled to gain traction more broadly, as investors awaited
a speech this week by U.S. President Trump for clues on his economic
Trump is set make his first major policy address to the U.S. Congress on
Tuesday, and is expected to give some details on his planned
infrastructure spending and tax reform.
But market participants say if the plans laid out are too vague or look
slow to execute that could weigh on a dollar that reached 14-year highs
earlier this year on the back of the "Trumpflation trade" - a view that
Trump's policies would boost inflation and growth.
"The FX market is going to be most reactive to anything in the address
which seems to reverse what we were already thinking was in train," said
Stephen Gallo, currency strategist at BMO Capital Markets in London,
highlighting corporate tax reform, fiscal stimulus and a rollback of
regulation as the policies investors had bet on.
"Anything that shrinks from that would probably cause a decent reaction
in the dollar negatively."
Treasury Secretary Steven Mnuchin said on Sunday that Trump will use the
event to preview some elements of his sweeping plans to cut taxes for
the middle class, simplify the tax system and make U.S. companies more
globally competitive, with lower rates and changes to encourage U.S.
Having hit a low of 111.92 yen in early trading in Asia, the dollar was
up 0.3 percent at 112.29 yen by 1200 GMT. Against a basket of major
currencies it was flat at 101.08.
Economic data on Friday put pressure on U.S. bond yields and the dollar,
showing new home sales grew less than expected in January and consumer
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A man counts U.S dollars at a money exchange office in central
Cairo, Egypt December 27, 2016. REUTERS/Mohamed Abd El Ghany
But speculators have not counted the dollar out, increasing bullish bets
on it for the first time in seven weeks, according to Commodity Futures
Trading Commission data released on Friday and calculations by Reuters.
The euro edged up just 0.2 percent to $1.0583 <EUR=>, as concerns that
far-right anti-EU leader Marine Le Pen could win France's upcoming
presidential election continued to weigh on the single currency.
Despite another raft of polls showing Le Pen losing either to centrist
Emmanuel Macron or the conservative Francois Fillon, investors, mindful
of the shocks of Brexit and Trump, have not counted her out, and many
fear that she could lead France out of the euro zone.
"The changes in the polls perhaps won't be listened to, because people
just don't trust them," said Rabobank currency strategist Jane Foley.
Sterling skidded to a twelve-day low of $1.2384 on a report that
Scotland was preparing to call another independence referendum when
formal Brexit negotiations are triggered in March.
(Editing by Robin Pomeroy)
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