US dollar losses pile up as investors spooked by Mnuchin comments

[HONG KONG] The US dollar suffered fresh losses on Thursday after two of Donald Trump's top cabinet members talked down the currency and hinted at a more belligerent trade policy.

The sell-off in the greenback especially hit exporters on Japan's Nikkei index, which tumbled for a second straight day, although dollar-priced oil and gold extended gains.

US Treasury Secretary Steven Mnuchin, speaking at the Davos gathering of the political and business elite, said: "Obviously a weaker dollar is good for us, it's good because it has to do with trade and opportunities."

His comments sent the US unit, which was already under pressure, tumbling with analysts suggesting it could be a part of the Trump administration's America First policy to help its own exporters.

They also came days after the US announced stinging tariffs on imports of solar panels and large washing machines, angering China and South Korea, and ramping up fears of a global trade standoff.

US Commerce Secretary Wilbur Ross defended those tariffs and warned Washington would be prepared to fight back in future against countries it felt had flouted the rules.

The dollar's sell-off was also helped by investors betting on tighter monetary policies by major central banks, bringing them in line with the Federal Reserve.

The dollar took a hit from the developments and in Asia extended the losses, briefly falling below 109 yen for the first time since September 2015 before edging back up.

That hit Japan's benchmark Nikkei 225, which ended the morning 0.9 per cent lower, having fallen 0.8 per cent on Wednesday from a 26-year high.

Stephen Innes, head of Asia-Pacific trading at Oanda, said: "While we already knew the administration previously favoured a weaker dollar, his comments caught the dollar prone and defenceless, opening floodgates to a massive wave of dollar-selling."

EQUITIES DROP

The pound was at its highest since Britain voted to leave the European Union in June 2016.

And the euro was at more than three-year highs above US$1.24 ahead of a key meeting of the European Central Bank later in the day that will be studied for an idea about its plans for reeling in crisis-era stimulus.

Among other currencies the Australian dollar was nearing highs not seen since mid-2015, while the Korean won was up 0.8 per cent helped by data showing the country's economy grew last year at its fastest pace in three years.

The Chinese yuan was at a two-year high, while Indonesia's rupiah, the Mexican peso and South African rand also rallied.

Oil prices climbed as the weaker dollar makes the commodity cheaper for holders of other currencies. WTI was up more than one per cent, while Brent was holding around US$71.

Crude buying was also boosted by a drop in US inventories and remarks from Russia and Saudi Arabia indicating a commitment to supporting prices.

Gold was up at US$1,361, within touching distance of its highest since July 2016. The yellow metal is also seen as a hedge against rising inflation expected to be caused by the weaker dollar.

On equity markets Hong Kong was off 0.5 per cent, with profit-taking adding to the selling pressure after the Hang Seng Index chalked up a succession of records since last week.

Shanghai was also off 0.5 per cent, while Sydney fell 0.2 per cent and Singapore eased 0.6 per cent. However, the strong growth data helped Seoul rise 0.8 per cent while Taipei, Wellington and Manila also rose.

AFP