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US dollar slides to 7-week low on Trump concerns; sterling rallies
[NEW YORK] The US dollar dropped to a seven-week low against a basket of major currencies on Wednesday, pressured by the prevailing uncertainty surrounding President Donald Trump's economic policy.
The US currency has fallen in four of the last five sessions after gaining 7 per cent in the last three months of 2016. The US dollar has especially struggled against the yen, falling 3 per cent since the beginning of the year.
Sterling, meanwhile, jumped above US$1.26 against the US dollar for the first time in six weeks on hopes for a trade deal between Britain and the United States, which Prime Minister Theresa May said on Wednesday would "put UK interests and UK values first".
"There's a lack of conviction in dollar longs at the moment," said Mazen Issa, senior FX strategist, at TD Securities in New York.
"All that Trump-based optimism over reflationary trades is being questioned. At this point in time with all the back and forth in the headlines with respect to the administration's policy, the watchword of the day has been uncertainty."
The US dollar was generally weaker on Wednesday despite US shares gaining and the Dow Jones Industrial Average trading above 20,000 for the first time.
But the focus on Wednesday shifted away from policies that might boost growth. Mr Trump was expected later in the day to start signing executive orders dealing with immigration and national security.
"Rather than hearing about fiscal stimulus, which I think most people assume is the gateway to higher interest rates and a stronger dollar, out of the gate from Trump we've heard about building a wall and trade protectionism," said David Gilmore, partner at FX Analytics in Essex, Connecticut.
The US dollar index was last down 0.4 per cent at 99.928 after touching 99.835. That marked its lowest level since Dec 8 and a nearly 4 per cent decline from a 14-year high hit at the start of the year.
Sterling, on the other hand, was last up 0.9 per cent at US$1.2632 after hitting a six-week high of US$1.2638. The euro was up 0.2 per cent against the US dollar at US$1.0751, hovering near Tuesday's seven-week high of US$1.0774.
The US dollar was down 0.5 per cent against the yen at 113.21 yen. The Australian dollar bucked the trend and fell against the greenback to a six-day low of US$0.7516 after both quarterly and annual inflation undershot expectations, rekindling hopes of one more rate cut from the Reserve Bank of Australia (RBA).