You are here
US dollar weakens after Trump criticises Fed
THE US dollar weakened on Tuesday after US President Donald Trump criticised the head of the Federal Reserve for raising interest rates.
Mr Trump told Reuters in an interview on Monday that he was "not thrilled" with Jerome Powell's rate hikes and said that the US central bank should do more to help him to boost the economy.
US presidents rarely criticise the Fed, whose independence is considered important for economic stability. But Mr Trump has made reducing US trade deficits a priority, and the combination of rising interest rates and a strengthening US dollar poses risks for export growth.
"It would appear that Mr Trump would like to keep the US dollar a little on the weak side in order to remain competitive," said CMC Markets chief markets analyst David Madden. "But given the dollar has been in demand recently on account of geopolitical issues and the Fed's monetary tightening policy, he might find it difficult to talk the greenback lower."
The US dollar index against a basket of six other currencies fell 0.4 per cent to 95.544 as at 1050 GMT after touching 95.440, its lowest since Aug 9.
Escalating trade tensions between the United States and its trading partners as well as a plunge in the Turkish lira have pushed the US dollar index up recently.
But the greenback weakened on Tuesday as investors ditched it as a safe haven before China and the United States hold talks this week that may help ease their dispute over trade.
Trade tensions have on the whole helped the US dollar, which benefits from geopolitical turmoil as the market seeks out less risky investments.
"It looks as though Trump's comments have caught the market very long dollar after last week's emerging market rout," said Chris Turner, head of currency strategy at ING in London.
The US dollar is unlikely to be knocked from its perch as one of the strongest performing major currencies this year, Mr Turner added.
"As long as (Trump) only verbally attacks the Fed rather than actively trying to influence its monetary policy ,this should not have any far-reaching effects on the USD exchange rates," he said.
The Fed has raised interest rates twice this year, and is expected to do so again next month.
Traders are preparing for the release of Federal Reserve policy meeting minutes on Wednesday. REUTERS