Dollar Continues To Slump, Sinks To 10-Month Lows

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The U.S. dollar continues to slump as it sank to 10-month lows against the other major currencies on Tuesday, after an attempt to pass healthcare reform collapsed and amid a sell-off ignited by another setback to U.S. President Donald Trump’s agenda and doubts over prospects for another rate hike this year.

Greenback Sinks Against Major Currencies

The U.S. dollar index against a group of six major currencies was 0.64% lower at 94.31, the lowest trough since September 9, 2016.

The dollar was at almost three-week lows, weaker against the yen, with USD/JPY down 0.55% to 112.00, after falling as low as 111.99 overnight.

The euro rose to fresh 14-month highs against the dollar, with EUR/USD advancing 0.86% to 1.1577, after touching overnight highs of 1.1538.

Sterling was lower, with GBP/USD down 0.26% to 1.3022 after data showing that the annual rate of inflation in Britain fell for the first time since October last month.

Healthcare Issue and Rate Hike

The dollar came under renewed selling pressure after a second attempt by Republicans to replace Obamacare collapsed late Monday, bringing a major policy blow to the Trump administration.

Around half of the cuts in healthcare spending were reserved to finance proposed tax cuts. The failure to deliver healthcare reform added to disappointment over the lack of progress on Trump’s economic agenda.

The dollar was already on the defensive side after Friday’s weak U.S. inflation and retail sales data that  added to doubts that the Fed will be able to raise interest rates again this year.

Other Currencies

Elsewhere, the Australian dollar jumped to two-year highs, with AUD/USD,  adding 1.59% to trade at 0.7926, after the minutes from the central bank’s last policy meeting showed it turning more positive on the economic outlook.

The New Zealand dollar was also higher, with NZD/USD rising 0.61% to 0.7364. The kiwi initially turned lower overnight before regaining ground after weak inflation data indicated that the country’s central bank will keep interest rates on hold for longer.

The Canadian dollar hit fresh 14-month highs, with USD/CAD last at 1.2624.

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Gold Down Amid Geopolitical Concerns; Ahead of Fed Minutes

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Gold prices are currently down on Wednesday, moving down beyond its lowest level in almost two months amid heightened geopolitical risk after North Korea said it had successfully test fired an intercontinental ballistic missile and ahead of the Wednesday release of Fed minutes from the June meeting which is expected to provide greater understanding into the chances for another hike this year.

Gold futures were at $1,217.86, by 10:04 AM GMT, down 1.62 cents, or around 0.1%. Trade volumes were thin on Tuesday, as U.S. markets remained closed for the Independence Day holiday.

The yellow metal dropped on Monday around 2% to touch its lowest since May 11 at $1,218.00 as a stronger dollar and gains in U.S. equities weighed. Then, gold prices bounced back after a sharp fall on Tuesday amid heightened geopolitical risk after North Korea said it had successfully test fired an intercontinental ballistic missile.

Meanwhile, looking ahead, the Federal Reserve will release the minutes of its most recent policy meeting at 2:00PM ET (1800GMT), as investors look for more clues on how committed the central bank is to hiking rates again this year. They are also looking for any detail on plans to reverse the Fed’s massive balance sheet.

North Korea Missile Test

South Korea’s military and Japan’s government confirmed that North Korea had fired an “unidentified ballistic missile” which landed in the Sea of Japan. Tokyo strongly protested what it called a clear violation of UN resolutions. Analysts said the missile  could put all of the U.S. state of Alaska in range for the first time.

U.S. Secretary of State Rex Tillerson said that the long-range missile launch indicated a “new escalation of the threat” of President Kim Jong-un’s regime and called for global action.

The timing of the launch is important, come just days before leaders from the Group of 20 nations are due to discuss steps to restrain North Korea’s weapons programs.

Other Comex Futures Also Down

Silver futures ticked down further 0.2 cents, or 1.1%, to $15.87 a troy ounce, after falling to $16.02 in overnight trade, a level not seen since early January.

Among other precious metals, platinum futures were down 0.14% to $904.85, while palladium rose 0.8% to $849.17 an ounce.

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Commodity Currencies Inch Higher As Oil Slumps

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Currencies linked to commodity or oil-linked currencies such as the Canadian dollar, New Zealand dollar, Russian ruble and the Norwegian krone inched higher as oil prices slumped.

The Canadian dollar was last trading up 0.20% at C$1.3460 per U.S. dollar, down from a five-week high of C$1.3388 touched on Thursday. New Zealand dollar surged back 0.30% to $0.7045 after slipping 0.34% earlier. The Russian ruble and the Norwegian krone rose 0.51% and 0.17% to $0.01766 and $0.1193 respectively.

Oil Prices Slumped

Battered oil prices slumped on Friday after tumbling 5% in the previous session.

On Thursday in Vienna, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers agreed to extend a deal to cut around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018, disappointing investors who are betting on longer or larger edges.

Brent crude futures were down from their last close 1.01% to $50.94 per barrel at 8:06 AM EDT as they were still set to end Friday with a weekly loss of more than 3 percent. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures were below $50, at $48.43, slipped 47 cents and 0.96% from their last close.

Matt Simpson, a senior market analyst, wrote in a Friday note, “Oil was practically begging to be knocked off its perch after rallying into the OPEC meeting with wide expectations (for) extended cuts. As the extensions were estimated to be around nine to twelve months, OPEC needed to far exceed this time horizon for oil to sustain its rally.”

Moreover, the dollar index lost 0.12% to 97.08, some risk-off sentiment driving the yen higher, who rose to a 3-day high against the greenback 0.76% to 111.03 yen, while the euro also edged higher 0.13% to $1.1225.

Meanwhile, Sterling fell over half a percent to as low as $1.2870, a two-week low on Friday, pulling further away from a May 18 peak of $1.3048, its strongest level since September last year, after a poll showed a narrowing lead for British Prime Minister Theresa May over her opposition prior to elections next month.

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Pound Sags After Deadly Manchester Explosion

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Sterling slipped on Tuesday after a suspected suicide attack killed at least 22 people and wounded 59 at a pop concert in the English city of Manchester.

Sterling eased 0.1 percent to $1.298, extending Monday’s 0.3 percent loss. The pound dropped 0.3 percent to 144.34 yen, after losing 0.2 percent on Monday.

The attack came up just two-and-a-half weeks before an election that Prime Minister Theresa May is expected to win easily, though polls showing that the contest was tightening put the sterling under pressure.

At least 22 people were murdered in a suicide bombing at a pop concert by U.S. singer Ariana Grande along with children in the northern English city of Manchester. Fifty-nine (59) others were injured in the attack carried out by a suicide bomber, who died after detonating an improvised explosive device.

If the attack on the concert is confirmed as a terrorist attack, this would be the worst and deadliest attack in Britain by militants since four British Muslims killed 52 people in suicide bombings on London’s transport system in July 2005.

“This has been the most horrific incident we have had to face in Greater Manchester and one that we all hoped we would never see.” said Hopkins. “We have been treating this as a terrorist incident and we believe, at this stage, the attack last night was conducted by one man. The priority is to establish whether he was acting alone or as part of a network.”

Euro At Six-Month High

The euro hit a six-month high overnight after German Chancellor Angela Merkel said it was “too weak” due to the ECB’s monetary policy, pointing out that this helped explain Germany’s relatively high trade surplus.

The common currency jumped 0.1 percent to $1.1249 after jumping as much as 0.5 percent and closing 0.3 percent higher on Monday.

Junichi Ishikawa, a senior FX strategist in Tokyo, said that Merkel’s comments boosted the euro and so the weakened dollar is not essentially a bad thing for Trump.

The chancellor’s comments delivered fresh momentum to the euro, which has been on a bullish footing since the French presidential elections earlier this month. Upbeat euro zone data and a widening spread between the 10-year German and U.S. government bond yields have also supported the currency.

Moreover, The safe-haven yen advanced against major peers like the dollar and euro but its gains were modest.

The dollar was barely down 0.09 percent at 111.14 yen after a dip to 110.860 but the euro rallied 0.03 percent to 125.12 yen.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, was 0.1 percent lower at 96.80.

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South Korean Won Down Amid U.S. Political Turmoil

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The South Korean won slipped for a third consecutive session to drop by more than a one-week low early on Friday as mounting uncertainty about Donald Trump’s presidency powered risk-aversion among investors in developing markets like South Korea.

The won was down at 1,126.9 against the US dollar as of 02:35 GMT, down 0.2 percent compared with Thursday’s close of 1,124.5. It had moved down as low as 1,131.1 as soon as the market opened.

A sharp acceleration in US factory activity gave the US dollar a lift on international exchanges, putting extra pressure on the won.

“It is true that the greenback itself strengthened in the global market, but the won seems to be losing more than expected due to strong risk-off mood in Asia region,” said Ha Keon-Hyeong, a Korean foreign exchange analyst.

He expected US dollar strength to continue in coming week, but saw won trading in a narrow range as end-month dollar-selling from local exporters will support the South Korean currency.

Meanwhile, Trump flatly denied he asked the Federal Bureau of Investigation to end a probe into possible collusion between his campaign team and Russia, but talked over the possibility that he could be impeached has made some investors in emerging markets look for safer havens.

U.S. President Donald Trump’s sacking of Comey last week set off a political firestorm after the latter had written a memo stating that Trump had asked him to drop a probe into his former national security advisor’s Russian connections.

Moreover, South Korean shares also edged up, with the Korea Composite Stock Price Index (KOSPI) barely closing up 0.07 percent at 2,288.48 as of 6:03 PM GMT.

Foreign investors turned to net buyers right before the closing bell, purchasing 23.9 billion won worth of KOSPI shares for the day.

Offshore investors had purchased 63.2 billion Korean won (S$78.11 million) worth of Kospi shares near mid-session.

Hyundai Motor Co. publicly denied a media report that it is seeking to introduce a holding company structure, though investors still made expectations. The company shares rose over 3 percent at 170,000 won while market heavyweight Samsung Electronics dropped 2.6 percent at 2,236,000 won.

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Nikkei slips after weak U.S. data, financial stocks underperform

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Japanese stocks slipped on Wednesday morning after the dollar eased against the yen on weak U.S. economic data, while financials stocks underperformed hit by lower US yields. The Nikkei shares average dropped  0.5 percent to 19,814.88 as of 2:15 AM EDT. The dollar slipped as well 0.5 percent to one-week lows against its perceived safe-haven Japanese counterpart and currently standing at 112.49 yen. Meanwhile, U.S. housing starts plummeted 2.6 percent to a seasonally adjusted annual rate of 1.17 million units, the lowest since November.

The market’s mood was further lessened by flagging confidence over the US president Donald Trump’s ability to push through tax reforms and stimulus programs that investors had been hopeful for since his election in November.

Recently, Trump asked his now-dismissed FBI Director James Comey to finish off the agency’s investigation into ties between former White House national security adviser Michael Flynn and Russia, according to a source who had seen a memo written by Comey.

“We still can’t say clearly that this Trump’s case is a serious risk to the stock market yet. But people are watching if it leads to more serious problems such as a difficulty for him to push through his tax reforms and fiscal policy,” said Takuya Takahashi, a strategist in Japan.

Overnight, financial stocks such as insurers and banks – that earn profits from investing in higher-yielding products stumbled after U.S. Treasury yields dropped down as low as 2.31 percent.

Moreover, Dai-ichi Life Holdings fell 4.0 percent, Sompo Holdings dropped 1.8 per cent, while Mizuho Financial Group flagged 2.4 per cent.

Domestic-demand-sensitive stocks, such as utility and food shares, gained as investors stayed defensive. Tokyo Gas moved up 2.3 percent, and Ajinomoto and Japan Tobacco both went up 1.3 per cent.

The broader Topix shed 0.5 percent to 1,575.82 and the JPX-Nikkei Index 400 declined 0.6 percent to 14,063.86.

While in commodities trading, Crude oil for June delivery was down 0.64% or 0.31 to $48.35 a barrel. Brent oil for delivery in July dipped as well 0.39% or 0.20 to hit $51.45 a barrel, while the June Gold Futures contract kept on increasing 0.50% or 6.20 to exchange at $1242.60 a troy ounce.

USD/JPY was down 0.56% to 112.49, while EUR/JPY rose 0.48% to 124.77.

The US Dollar Index Futures was down 0.13% at 98.06.

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Yen Falls against Dollar amid Cyber Attack, North Korea Test

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The safe haven yen fell against the U.S. dollar, who bounced back from its early losses, on Monday, ignoring another missile test by North Korea on Sunday and threats from a cyber attack that spread around the globe at the weekend.

USD/JPY was up 0.09% to 113.48 by 06.38 EDT, after dropping down to overnight lows of 113.17.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, pulled back a little  0.26% at 98.79. Weak U.S. data Friday dampened the outlook for the pace of further U.S. tightening this year.

The yen went higher overnight after North Korea confirmed that it had carried out a mid-to-long range missile test on Sunday.

The test was a significant advance in North Korea’s drive for an intercontinental ballistic missile capable of carrying a nuclear warhead and reaching the U.S. mainland.

North Korea’s statement over the weekend that its latest missile test can carry a large nuclear warhead worried investors at the start of a new trading week and provided a minor increase to the Japanese Yen’s safe-haven appeal. Investors were also cautious amid fears that a weekend cyberattack that hit businesses, hospitals and government agencies in at least 150 countries around the world is probably rising.

The dollar had declined last Friday after data showing that U.S. retail sales grew less than expected last month and core inflation dropped raised concerns over the economic viewpoint.

Ahead, China reports fixed asset investment with a 9.1% gain seen for April year-on-year, industrial production with a 7.1% rise seen and retail sales with an increase of 10.6% expected.

Later this week, the U.S. will report on building permits, housing starts, industrial production and jobless claims for fresh indications on the strength of the economy. Japan is to report on first quarter growth and the UK is to produce what will be carefully watched data on inflation, employment and retail sales amid signs that the headwinds from Brexit are rising.

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