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US dollar pauses after Trump rally, backs off nearly 14-year high

Tuesday, November 29, 2016 - 06:16
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The US dollar fell on Monday along with US Treasury yields, surrendering some gains from the sharp rally following Donald Trump's surprise victory in the US presidential election.

[NEW YORK] The US dollar fell on Monday along with US Treasury yields, surrendering some gains from the sharp rally following Donald Trump's surprise victory in the US presidential election.

The greenback had surged more than 4 per cent against a basket of currencies in the wake of the Nov 8 election, with investors expecting a Trump administration to bring an expansion of fiscal policy, boosting inflation and pushing up interest rates.

The index hit an almost 14-year high of 102.05 on Thursday before falling on Friday and slipping further to 101.32 on Monday.

"The last few days of November and the first few days of December will be chock full of risk events, so that's provided a convenient backdrop to take profit on the dollar's big rally," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

Other factors, such as a drop in US Treasury yields and a packed economic calendar this week, also contributed to the US dollar rally's halt.

Investors will be looking to the release of US third-quarter gross domestic product data as well as consumer confidence and a reading on consumption early on Tuesday. That will kick off a week of key economic indicators culminating with the November jobs report on Friday.

"We would need to see solid prints to sustain the dollar's buoyant run," Mr Manimbo said.

The greenback fell 1.6 per cent to 111.32 Japanese yen overnight. However, it pared about half of those losses on Monday, and was last down 0.75 per cent at 112.38 yen.

Boris Schlossberg, BK Asset Management's managing director of FX Strategy, wrote in a client note that the US dollar-yen dive was prompted by President-elect Trump's tweets over the weekend in which he claimed, without evidence, that "illegal" votes were responsible for him losing the popular vote to Democratic challenger Hillary Clinton.

"The blatant lie without any proof - and one that has been roundly challenged by all of the country's voting experts - was unprecedented in American politics and may have made some market traders doubt Mr Trump's stability," Mr Schlossberg said in the note.

The euro climbed to an 11-day high of US$1.0686, boosted by the election of Francois Fillon as the centre-right candidate in next year's French presidential elections.

The euro retreated from those gains by the start of North American trading. It was last up 0.1 per cent against the US dollar at US$1.0595.

REUTERS

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