HONG KONG: The dollar struggled in Asia Wednesday after the previous day’s hefty sell-off as Donald Trump and one of his key economic advisers again hit out at other nations using their weaker currencies to gain a trade advantage.
The outbursts are the latest from the unpredictable administration that has spooked global markets and fuelled a wave of uncertainty, leading traders to seek out safe investments.
Peter Navarro, who advised Trump during the campaign and heads the White House’s new National Trade Council, said in an interview with the Financial Times that Germany “continues to exploit other countries in the EU as well as the US with an ‘implicit Deutsche mark’ that is grossly undervalued”.
Later, Trump told a meeting of business executives that Japan had “played the money market and the devaluation market”, suggesting they had been keeping their currencies weak to boost trade.
The comments sent the yen and euro surging against the dollar Tuesday and the US unit continued to labour in early Asian trade, with most high-yielding currencies also up, including the South Korean won, Australian dollar and Indonesian rupiah.
Tuesday’s losses were a far cry from the greenback rally that followed Trump’s November election win, when investors bet he would follow through with promises to cut taxes and spend big on infrastructure, which would in turn fire inflation and lead to a interest rate hikes.
– ‘No one is safe’ –
While the tycoon will likely press on with those measures, the latest remarks added to worries that the White House is intent on pursuing a protectionist agenda that many warn could lead to a global trade war.
“It appears that no one is safe, friend or foe from the wrath of this new US administration when it comes to trade,” Stephen Innes, senior trader at OANDA, said in a note.
By the break in Tokyo, the Nikkei was flat with the stronger yen offset by bargain-buying following this week’s losses.
Hong Kong was down one percent, with dealers brushing off data showing Chinese factory activity expanded last month, suggesting the world’s number two economy is stabilising.
Singapore shed 0.1 percent while there were also losses in Wellington but Sydney was up 0.4 percent and Seoul added 0.5 percent.
Markets were already well in the red this week after Trump’s much-criticised executive order Friday banning entry to travellers from seven Muslim-majority countries and imposing a temporary ban on refugees.
Greg McKenna, chief market strategist at CFD and FX provider AxiTrader, said: “As uncertainty grows and investors recognise there are some uncertainties around Trumponomics and the reflation of the US economy — they are taking some cash off the table.”
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: FLAT at 19,040.74 (break)
Hong Kong – Hang Seng: DOWN 1.0 percent at 23,138.80
Shanghai – Composite: Closed for holiday
Euro/dollar: DOWN at $1.0792 from $1.0797
Pound/dollar: UP at $1.2580 from $1.2576
Dollar/yen: UP at 113.00 yen from 112.85 yen
Oil – West Texas Intermediate: DOWN nine cents at $52.72 per barrel
Oil – Brent North Sea: DOWN 13 cents at $55.45
New York – Dow: DOWN 0.5 percent at 19,864.09 (close)
London – FTSE 100: DOWN 0.3 percent at 7,099.15 (close)
