US dollar tumbles to five-week lows as Trump trade loses steam

[NEW YORK] The US dollar hit its lowest level in five weeks against a basket of currencies on Thursday and was on course for its worst week since November, hit by a loss of confidence in the US reflation trade a day after a news conference by US President-elect Donald Trump.

Speculators had driven the US dollar index, which measures the greenback against a basket of six major currencies, to a one-week high Wednesday in anticipation that Mr Trump's first news conference since his Nov 8 victory would give more detail on new fiscal spending and tax measures to repatriate US corporate capital held overseas.

Instead, the event was dominated by debate over Russian hacking and unsubstantiated claims that he had been caught in a compromising position in Moscow. The US dollar index tumbled as much as 0.9 per cent to 100.720, its weakest since Dec 8, after touching 102.950 before the news conference Wednesday.

The index pared losses in afternoon trading and was last down just 0.4 per cent at 101.370.

"Yesterday's press conference failed to disclose any information on tax reform, on fiscal stimulus, whether that's going to come or not," said Sireen Harajli, currency strategist at Mizuho in New York.

"We're seeing a little bit of that disappointment."

The US dollar index had gained 4 per cent between Mr Trump's election victory and Wednesday on expectations that his promised policies would boost inflation and encourage the Federal Reserve to raise interest rates. The index is on track to fall 0.9 per cent this week to mark its worst week since that ended Nov 4.

The US dollar weakened as much as 1.4 per cent against the yen to 113.76 yen, its weakest level in five weeks, while the euro hit its highest in five weeks against the US dollar of US$1.0684 .

Sterling hit a six-day high against the US dollar of US$1.2317, rebounding from a three-month low of US$1.2038 touched Wednesday.

The US dollar was last down 0.3 per cent against the peso at 21.7870 pesos. The peso broke the 22 peso per US dollar mark for the first time on Wednesday after Mr Trump said US auto companies would face a high tax for products made south of the border.

Analysts said it was unclear how long the US dollar weakness would last.

"For the moment, I would stop short of drawing broader conclusions. I think (Trump) will still implement his policy platform," said Lee Hardman, a currency economist with Japan's MUFG in London.

REUTERS