Dollar losses build as Trump crisis stokes fears for agenda

Published 18.05.2017 00:00
Updated 18.05.2017 01:55

The U.S. dollar sank yesterday with a fresh crisis in the White House fueling concerns that Donald Trump's economy-boosting agenda could be run off-track. The administration was once again rocked by allegations over its links to Russia after it was reported Trump had divulged classified information to the nation's foreign minister.

That was followed late Tuesday by claims from recently-fired FBI boss James Comey that Trump pressed him to drop a probe into ex-national security adviser Michael Flynn over his links to Moscow.

While the Oval Office has furiously denied any wrongdoing, there is a growing sense of crisis that even raised questions over a possible impeachment, throwing into doubt Trump's plans for tax cuts, big spending and red-tape slashing.

Bets that the plan would fire the economy helped fan a dollar and global equities rally in the months after Trump's election. "There has been a lot of focus on the U.S. president who admitted that he did share information with Russia," said Greg McKenna, chief market strategist at AxiTrader. "But what's potentially important for markets, in the weeks and months ahead, is that the president's apparent missteps may galvanize his opponents, which could make it harder to implement his economic agenda."

The dollar took a beating in New York and extended the losses yesterday.

The euro briefly broke above $1.11 to levels not seen since Trump's election win in November, while the yen is also piling pressure on the U.S. unit. The dollar bought 112.52 yen, well down from recent peaks above 114 yen seen last week.

The uncertainty hit stock markets, with Europe's main indices falling in morning deals, although London bucked the trend, trading flat on the back of official figures showing that Britain's unemployment rate had fallen to a 32-year low.

The market was also buoyed by banking giant Lloyds, which was up 2.2 percent after announcing it had returned to full private ownership following its government bail-out at the height of the financial crisis. Elsewhere in Europe, thin trading and the murky U.S. political outlook dragged down stocks, with the Paris CAC shedding 0.5 percent and Frankfurt's DAX down 0.4 percent.

In Asia, Tokyo ended down 0.5 percent as the stronger yen hit exporters, while Hong Kong gave up 0.2 percent by the finish and Shanghai closed 0.3 percent lower.

Share on Facebook Share on Twitter