US dollar hits 1-month low vs key rivals after Trump news conference

[NEW YORK] The US dollar fell to a one-month low against a basket of major rivals on Wednesday, reversing an early rally after a news conference held by President-elect Donald Trump disappointed US dollar bulls who were expecting a pro-growth message.

The greenback, which hit one-week highs against the euro and franc and a three-month high against sterling before the conference, turned negative against those currencies after Mr Trump attacked US intelligence agencies and denounced claims he had been caught in a compromising position in Russia but did not elaborate on his economic policy agenda.

Investors have been betting Mr Trump will boost public spending and spur repatriation of overseas funds by US companies, policies expected to bring higher inflation and induce the Federal Reserve to raise interest rates at a steady pace.

Those bets have driven the US dollar index, which measures the greenback against a basket of six major currencies, up 4 per cent since the Nov 8 election and to a 14-year high of 103.820 on Jan 3.

The US dollar index, which hit a one-week high before the conference of 102.950, sank to its lowest since Dec 14 at 101.280 after it had ended. The index pared losses later in afternoon US trading and was last down 0.15 per cent at 101.860.

"The market was disappointed by Trump's lack of specificity and details on his fiscal spending plans," said Kathy Lien, managing director at BK Asset Management in New York.

The euro rose as much as 0.6 per cent against the US dollar after the conference to a session high of US$1.0622, just below an 11-day high of US$1.0626 struck on Tuesday and rising from a one-week low of US$1.0455 struck earlier.

The US dollar sank about 1.3 per cent against the yen to a one-month low of 114.26 yen after gaining as much 0.9 per centto 116.85 yen before the conference.

Sterling, which had fallen more than one per cent to a three-month low of US$1.2038 before Mr Trump's comments, later rallied 0.8 per cent to US$1.2273.

"The market had some unrealistic expectations" for the press conference, said Steven Englander, managing director and global head of G10 FX strategy at Citigroup in New York.

The Mexican peso hit a fresh record low against the dollar of 22.0440 pesos, marking an exception to the broad dollar weakness after Mr Trump warned US auto companies would face a high tax for products made south of the border.

REUTERS