US dollar drops vs yen as investors react to Trump executive actions

[NEW YORK] The US dollar fell more than one per cent against the Japanese yen on Monday following a weekend of negative headlines relating to US President Donald Trump's executive orders on immigration.

Mr Trump's order to temporarily ban the entry of refugees and people from seven Muslim-majority countries faced mounting criticism, even from some prominent Republicans, and sparked protests that drew tens of thousands in major American cities.

"The first week in office was really not focused on fiscal policy or growth or any of the supply-side enhancing measures," said Mark McCormick, North American head of FX strategy at TD Securities in Toronto.

"It was really focused on all the negatives around immigration, trade risks, some of the other negative issues, which the market hasn't really been focused on."

The US dollar fell by as much as 1.4 per cent against the safe-haven yen to a session low of 113.46 yen, as the immigration curbs put the spotlight back on Mr Trump's protectionist bent and the risks it poses for the economy.

"The dollar is being sold a bit because of the reaction to Trump's executive order on immigration, just thinking it could create all sorts of problems with trade partners," said Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.

The euro fell to its lowest level since Jan 19 against the greenback after the release of German inflation data that came in slightly weaker than expected, but retraced the move after investors unpacked the data, which showed German consumer price inflation hit the highest in three-and-a-half years nearing the European Central Bank's price stability target of just under 2 per cent.

The euro was flat against the US dollar at US$1.0690.

Sterling fell 0.55 per cent to US$1.2477 ahead of Thursday's first Bank of England meeting of 2017. The pound slipped off a five-week high of US$1.2674 at the end of last week.

The US dollar index tracks the greenback against the euro, pound, yen and three other major world currencies. It was little changed at 100.510.

A stronger US dollar was one of 2017's big calls for many investment banks and asset managers at the end of last year, but that view has been undermined by worries about how US trade and diplomacy will pan out under Mr Trump's presidency.

The Mexican peso rose to its highest level of 2017 against the US dollar on Monday. It gained 3.24 per cent last week, its largest weekly percentage gain since Feb 2016.

REUTERS