US dollar skids on heightened US-China trade tension

New York

THE dollar stumbled on Friday after President Donald Trump ordered US companies to start looking for an alternative to China as Beijing imposed more tariffs on American goods, further exacerbating a prolonged trade war between the world's two largest economies. That triggered mass selling in the dollar, which fell from a three-week high against the euro and to one-week troughs versus the Japanese yen and Swiss franc. Benchmark US 10-year Treasury yields also fell sharply.

The dollar, however, strengthened against the Chinese yuan in the offshore market, hitting a two-week high.

"Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA," Mr Trump wrote on Twitter. Mr Trump cannot legally compel US companies to abandon China immediately. He gave no details on how he might proceed with any such order. His tweet followed China's announcement on Friday of retaliatory tariffs on about US$75 billion worth of US goods, putting as much as an extra 10 per cent on top of existing rates.

Mr Trump's comments overshadowed a speech by Federal Reserve chair Jerome Powell, who did not announce a major stimulus measure to ease a worsening global economic outlook, but set the stage for further interest rate cuts.

Mr Powell said the US economy was in a "favourable place" and the Fed would "act as appropriate" to keep the economic expansion on track.

In afternoon trading, the euro rose 0.6 per cent to US$1.1148, after touching a three-week low of US$1.1052. An index that tracks the dollar against six major currencies was down 0.6 per cent at 97.624.

The dollar fell to a one-week low against the yen and was last down 1.1 per cent at 105.32. It earlier hit a one-week high of 106.73 yen.

Against the Chinese yuan, the dollar was up 0.6 per cent at 7.1314 yuan, after touching a two-week peak of 7.1383. REUTERS