US dollar near six-week low, pressured by Trump's dollar comment

[TOKYO] The US dollar index wallowed near six-week lows on Wednesday, pressured by US President-elect Donald Trump's comments showing concern over the currency's strength, while sterling edged down after posting its biggest one-day gain since at least 1998 after British Prime Minister Theresa May outlined her 'Brexit' plans.

The US dollar index, which measures the greenback against the six major peers, last stood at 100.41, up 0.1 per cent, after falling to 100.26 on Tuesday, its lowest since Dec 8.

A sell-off in the US dollar deepened after US traders returned from a long weekend after Martin Luther King Jr Day and reacted to Mr Trump's weekend comments. In an interview with the Wall Street Journal, Mr Trump said US companies "can't compete with (China) now because our currency is strong and it's killing us."

The US dollar had surged at the end of 2016 on expectations that Mr Trump's proposed fiscal stimulus boost growth and inflation. But on the other hand, Mr Trump has also continued to strike a harsh tone toward Beijing, and his protectionist rhetoric is beginning to play a larger role in investors' expectations.

"If the US government officials further talk down the US dollar, the greenback could weaken and the correlation to the interest rate differentials may end," said Junya Tanase, chief forex strategist at JP Morgan in Tokyo.

Higher US Treasury yields had fuelled demand for the US dollar relative to currencies such as the euro and yen.

The US dollar added 0.2 per cent to 112.79 yen, after hitting a seven-week low of 112.60 yen on Tuesday. The yen has strengthened for seven straight sessions.

The euro last stood at US$1.07064, slightly below US$1.07195 hit on Tuesday, its highest level since Dec 8.

Sterling, meanwhile, slipped 0.3 per cent to US$1.2382, after it marked the biggest one-day percentage gain since at least 1998 on Tuesday, after Ms May's speech.

Ms May pledged to hold a parliamentary vote on whatever deal Britain eventually reaches to leave the European Union. As expected, Ms May said Britain will pull out of the European Union's single market when it exits the bloc and not look for a compromise deal to retain some of its benefits.

Sterling rose by about 3 per cent against the US dollar on Tuesday, touching its highest level in nearly two weeks and posting its biggest gain according to Thomson Reuters Matching data, which goes back to 1998.

Investors' next focus is on US Federal Reserve chair Janet Yellen's speech later in the day.

REUTERS