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The
dollar had begun to climb at the end of last week after its
worst month in five, as expectations of higher inflation and tax
cuts to spur growth under the new president pushed U.S.
government bond yields higher.
That was halted by a combination of weaker-than-expected U.S.
economic growth data on Friday and the uproar that followed
Trump's order restricting entry to the United States for
travelers from seven Muslim-majority nations.
"Concerns on protectionism appear to be rising after President
Trump’s executive order to restrict immigration," said Adam
Cole, head of G10 FX strategy with RBC in London.
After an Asian session becalmed by Chinese New Year holidays,
the yen rose 0.4 percent to 114.58 yen per dollar <JPY=> in
morning trade in Europe. The greenback was flat at $1.0695 per
euro <EUR=> and marginally higher at $1.2537 against sterling.
The euro drew some support from a rise in European government
bond yields to their highest in a year after regional data
showed solid rises in annual German inflation. That came at the
start of a week dominated by central bank meetings in the United
States, Japan and Britain.
The bond market, however, also suggested euro investors were
pricing in more risk from France's presidential election in
April after the selection of a more radical leftist candidate by
the French Socialists at the weekend.
A stronger dollar was one of 2017's big calls for many
investment banks and asset managers at the end of last year but
that faith has been undermined by worries about how U.S. trade
and diplomacy will pan out under Trump's presidency.
At the top of the list are concerns that the new administration
may actively pursue a weaker dollar as part of efforts to change
its trading relationship with China and others.
"The weak U.S. GDP is doing the dollar no favors. But it also
takes courage to keep buying the dollar, considering what Trump
has said about the kind of a currency policy he could pursue,"
said Daisuke Karakama, market economist at Mizuho Bank in Tokyo.
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by
Gareth Jones)
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