Dollar grinds higher as
Trump debate deepens
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[January 20, 2017]
By Patrick Graham
(Reuters) - The dollar edged higher on Friday, steadying after a
volatile week that underlined the growing uncertainty over how Donald
Trump will behave after his inauguration as U.S. President.
The U.S. currency is still up 4 percent against a basket of others since
Trump's election victory in November, but has shed 1.3 percent in value
so far in January as concerns grow over Trump's protectionist bent and
attitude to a strong greenback.
It turned around early losses to inch up 0.2 percent on the day in
morning trade in Europe and stand unchanged for the week <.DXY>. Against
the euro, it hovered just below $1.0650, less than a cent above 7-week
lows hit on Tuesday.
"What is clear is that the risks from Trump are not as one-sided as the
market has been playing so far, particularly when you look at the
protectionist plans," said Thu Lan Nguyen, a currency strategist with
Commerzbank in Frankfurt.
"We are moderately bullish on the dollar but we are not looking for as
much appreciation as we have seen in the last few years ... maybe a 3
percent rise in the DXY this year."
The dollar index <.DXY>, which was nearing 100 earlier this week, was
back at 101.35 by 1227 GMT.
That seems largely the product of Yellen's comments on Wednesday
predicting the U.S. central bank would raise interest rates a "few"
times a year, compared with the two hikes currently priced in by
But after shattering moves back and forward in Britain's pound at the
start of this week, a number of bankers said the week had been dominated
by the actions of speculative players using generally lower liquidity to
push the market around.
"The combination of US political uncertainties and higher-than-normal
investor regulatory commitments have kept trading volumes well below
their average in the first few weeks of 2017," said Adam Myers, a
strategist with CBA in London.
"Low volumes have allowed speculators to exploit ranges in both the euro
and the yen. We expect such behavior to be thwarted next week as the new
president begins his first week in office."
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U.S. President-elect Donald Trump speaks to diplomats at the
Presidential Inaugural Committee (PIC) Chairman's Global Dinner in
Washington, U.S. January 17, 2017. REUTERS/Jonathan Ernst
job and housing data on Thursday made the core case for the dollar's strength,
with homebuilding rebounding sharply in December and the number of Americans
filing for unemployment benefits dropping unexpectedly.
But after a news conference last week that disappointed those betting on a
bullish message on fiscal stimulus, it is Trump's message on China, trade policy
and taxation that has dominated the week and will be watched closely in his
RBC Capital Markets in a note on Friday cited research calling for another 25
percent boost for the dollar if U.S. corporate tax rates are cut to 20 percent,
but said some of that may already be in priced in and the rest will take time.
Others worry that if Washington closes in on itself the result may be more
disruptive than supportive for the global economy and send investors searching
for traditional safe havens like the yen.
"Our best guess is that the rise in the dollar would partly but not fully offset
the drop in export costs," RBC wrote in the note.
"The reality would likely be a longer path of dollar gains that would come via
inflation and higher U.S. rates. It is also unlikely to hit all currencies
(Additional reporting by Yuzuha Oka in TOKYO; Editing by Hugh Lawson and Richard
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