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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Dollar Increases Gains Against Other Currencies

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The dollar extended gains against the other major currencies on Monday, pulling away from nine-month lows, but the greenback’s upside was expected to stay limited amid expectations for tighter monetary policy by major central banks.

The euro dropped against the dollar 0.51% to 1.1369, off Friday’s 13-month peak of 1.1448, while the sterling declined 0.47% to 1.2967, pulling away from last week’s six-week high of 1.3032.

The dollar index against a group of six major currencies was 0.50% higher at 95.86, crawling off a nine-month trough of 95.470 plumbed on Friday.

In last week’s comments, the heads of the European Central Bank, the Bank of England and the Bank of Canada embraced a more aggressive view on monetary policy, indicating that they were getting ready to join the Federal Reserve in policy tightening.

Aggressive signals from foreign central banks contrasted with doubts over whether the Fed will be able to carry out hike rates again this year given a recent batch of weak U.S. economic data and growing skepticism that the Trump administration will be able to deliver on its pro-growth agenda.

Elsewhere, the greenback rallied against the yen and swiss franc 0.55% to 113.04 and 0.50% to trade at 0.9626, respectively. Meanwhile, the aussie dollar and kiwi were weaker against the dollar, down 0.44% to 0.7656 and 0.55% to 0.7292, respectively.

The yen briefly rose after Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party suffered an historic defeat in an election in Tokyo on Sunday, in a vote that could be a harbinger for national elections.

“The Tokyo election won’t have a strong market impact, in my view, as there are no opposition parties in Japan that can immediately replace the (ruling) LDP,” said Yukio Ishizuki, a senior currency strategist.

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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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Stocks Rise in Asia as Oil Extends Gains

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Stocks in Asia rose higher, climbing to a fresh-two year high on Tuesday, while oil extended gains after major producers, Saudi Arabia and Russia agreed to an extension of supply cuts until 2018.

Stock benchmark indexes in Australia and Japan climbed, offsetting losses in China shares, after the S&P 500 Index closed above 2,400 for the first time. Crude rose for a fifth day, topping $49 a barrel as Saudi Arabia and Russia extending output cuts will probably influence other countries to follow. Shenzhen shares increased while those in Shanghai erased an earlier decline after the closing of a global summit in Beijing. The yen fortified with the Mexican peso and South Korean won.

The surge in oil is keeping the global stocks bullish even as concern rises over the strength of the global economy. Chinese industrial production and retail data came in weaker than expected Monday, after American retail sales and inflation also cast a shadow on growth. Financial markets have also gotten a boost from China’s sweeping plan to improve global infrastructure.

“At the moment we are taking inspiration from the higher oil price and what it means for energy prices across the world; what it means for (capital expenditure); and what it means for reflation — and of course the market loves reflation,” said Chris Weston, a chief market strategist in Australia.

Main Moves in Financial Markets

The MSCI Asia Pacific Index increased 0.2 percent as of 10:54am in Tokyo, heading for the highest closing level in 2 years. Japan’s Topix rose 0.3 per cent, while the Nikkei 225 Stock Average climbed to within two points of reaching 20,000 before pulling back. Australia’s S&P/ASX 200 climbed 0.2.

China shares traded in Hong Kong retreated 0.6 percent after surging 1.6 percent on Monday following optimism over Beijing’s infrastructure spending program. The Shanghai Composite Index slumped 0.7 per cent and the Hang Seng Index lost 0.3 percent.

Oil added 0.6 per cent to US$49.12 a barrel, after surging 2.1 per cent on Monday while Gold gained 0.3 percent to US$1,234.61 an ounce, rising for a fourth straight sessions.

The yen rose 0.2 percent to 113.52 per US dollar, after dropping 0.4 percent on Monday. The South Korean won increased 0.4 percent to the highest since April 4, while the Mexican peso added 0.3 percent.

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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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Japan Stocks Increases at Close of Trade; Nikkei 225 Increase 0.23%

After the close on Thursday, Japan stocks increased as gains in the Construction, Paper & Pulp and Services sectors led shares higher.

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After the close on Thursday, Japan stocks increased as gains in the Construction, Paper & Pulp and Services sectors led shares higher.

The Nikkei 225 increased 0.23% at the close in Tokyo.

The poorest performers of the session were DeNA Co Ltd (T:2432), which decline 5.45% or 138.0 points to trade at 2392.0 at the close. The Japan Steel Works, Ltd. (T:5631) dropped 2.44% or 46.0 points to end at 1843.0 and Concordia Financial Group Ltd (T:7186) declined 1.90% or 10.3 points to 531.7.

The top performers of the session on the Nikkei 225 were Toshiba Corp. (T:6502), which increased 6.75% or 13.1 points to trade at 207.2 at the close. Temporarily, Tokai Carbon Co., Ltd.(T:5301) added 4.20% or 20.0 points to end at 496.0 and Nippon Meat Packers, Inc.(T:2282) increased 3.39% or 105.0 points to 3205.0 in late trade.

Decreasing stocks outnumbered progressing ones on the Tokyo Stock Exchange by 1634 to 1383 and 325 ended unaffected.

The Nikkei Volatility, which gauges the implied volatility of Nikkei 225 options, increased  19.63% to 18.65.

Delivery of crude oil for May increased 0.50% or 0.24 to $48.28 a barrel.

Somewhere else in commodities trading, delivery of Brent oil in May increased 0.45% or 0.23 to hit $50.87 a barrel, although the April Gold Futures contract drop 0.21% or 2.65 to trade at $1247.05 a troy ounce.

USD/JPY increased  0.01% to 111.17, while EUR/JPY declined 0.01% to 120.01.

The US Dollar Index Futures increased 0.04% at 99.52.

On Additional News

Taiwan stocks increased after the close on Thursday, as increases in the  Construction, Electricity and Textile sectors led shares higher.  At the close in Taiwan, the Taiwan Weighted increased 0.08%.

The top performers of the session on the Taiwan Weighted were I-Hwa Industrial Co Ltd (TW:1456), which surge 10.00% or 1.15 points to trade at 12.65 at the close. In the meantime,Lung Hwa Eltrs (TW:2424) added 10.00% or 3.00 points to end at 33.00 and Champion(TW:1806) increased 10.00% or 0.79 points to 8.69 in late trade.

Increasing stocks outnumbered dropping ones on the Taiwan Stock Exchange by 426 to 332 and 121 ended unmoved.

The poorest performers of the session were Hiwin (TW:2049), which declines l 7.33% or 15.00 points to trade at 189.50 at the close. Zhen Ding (TW:4958) dropped 5.32% or 4.10 points to end at 73.00 and Falcon Power Co Ltd (TW:1516) declined 5.00% or 1.10 points to 20.90.

Shares in Lung Hwa Eltrs (TW:2424) increased to 52-week peaks; increasing 10.00% or 3.00 to 33.00. Shares in Champion (TW:1806) surge  to 52-week peaks; up 10.00% or 0.79 to 8.69.

USD/TWD declined 0.04% to 30.481, while TWD/CNY increased 0.04% to 0.2261.

The US Dollar Index Futures was unchanged 0.00% at 99.48.

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Greenback Nudges Up on U.S. yields, Euro Retreats From One Month Peak

On Tuesday, the greenback edged up against a basket of currencies as U.S. Treasury yields extended their increase in advance of an expected interest rate increase by the Fed Reserve.

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On Tuesday, the greenback edged up against a basket of currencies as U.S. Treasury yields extended their increase in advance of an expected interest rate increase by the Fed Reserve.

The euro pulled back from one month peaks after dovish sounding remarks from European Central Bank officials tempered its recent increase.

With a rate increase already perceived as a done deal, investor concentration was on what kind of a message the Fed Reserve would deliver after its two-day meeting starting later on Tuesday.

“The latest rise in Treasury yields is underpinning the dollar, but it is a wait-and-see mood that is mostly prevailing in the market ahead of the Fed’s decision,” said Shin Kadota, senior currency strategist at Barclays (LON:BARC) in Tokyo.

“Expectations for a hawkish dot plot was a factor that has pushed up the dollar recently, with hopes for the number of times the Fed could hike rates this year having increased to four from three.”

The “dot plot” is policymakers’ rate projections and provides a view into their interest rate outlook.

The dollar index against a group of major currencies (DXY) increased  0.1% at 101.410, adding to modest gains made the previous day.

Having gone to 115.510 on Friday, the U.S. currency was steady at 114.850 yen,  its highest since Jan. 19.

The euro was effectively flat at $1.0651.

On Monday, the  common currency had increased to a one-month peak of $1.0714, increased after some members of the ECB’s Governing Council talk over the possibility of higher interest rates at the previous week’s policy meeting.

But its increase was tempered later on Monday after European Central Bank (ECB) Governing Council member Jan Smets reportedly said the previous week’s policy meeting was not an indication of approaching policy change. Bank of France Governor Francois Villeroy de Galhau also stated increasing inflation in the euro zone was extremely exaggerated.

Caution in advance of the upcoming elections in Holland also capped the euro. On Wednesday, the Dutch will vote  in an election that was seen as a test of anti-immigrant sentiment.

“The market faces a series of event-related risks. It’s hard to predict whether that would be the Dutch elections, the Fed policy decision, (U.S. President Donald Trump’s) budget proposal or the G20 meeting, but the dollar faces significant downside risks,” said Masashi Murata, senior strategist at Brown Brothers Harriman in Tokyo.

Murata added that latest expectations for four U.S. rate increases this year considered excessive, and that the Fed Reserve meeting could help calm exaggerated policy tightening expectations.

On Thursday, the Trump administration’s fiscal 2018 federal budget plan will be released, and then on Friday,  G20 finance ministers and central bankers will meet in Germany.

Sterling was a touch lower at $1.2200, its increased overnight stalling after parliament passed a legislation giving British Prime Minister Theresa May the power to start the European Union  exit process. Theresa May has now cleared the final obstacle standing between her and the beginning of the divorce talks.

The pound had surged 0.4% overnight after Scotland’s First Minister Nicola Sturgeon demanded a fresh Scottish independence referendum, however, stated it should take place at the earliest in late 2018.

The Australian dollar declined 0.15% at $0.7561, giving back some of the previous day’s gains made when the greenback  fell against the euro.

The 10-year U.S. Treasury note yield (US10YT=RR) was at 2.616% after increasing overnight to 2.628%, its highest since mid-December.

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