Dollar pressured by worries over Trump protectionism

A woman is reflected on an electronic stock indicator of a securities firm in Tokyo, Tuesday, Jan. 24, 2017. Asian shares were mixed Tuesday as uncertainty mounted over U.S. President Donald Trump's trade and regulatory policies. (AP Photo/Shizuo Kambayashi)

A woman is reflected on an electronic stock indicator of a securities firm in Tokyo, Tuesday, Jan. 24, 2017. Asian shares were mixed Tuesday as uncertainty mounted over U.S. President Donald Trump's trade and regulatory policies. (AP Photo/Shizuo Kambayashi)

Published Jan 24, 2017

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Tokyo - The dollar wallowed near

seven-week lows in Asian trade on Tuesday, pressured by concerns

about the impact of U.S President Donald Trump's protectionist

trade stance.

The dollar index, which tracks the greenback against a

basket of six major peers, slipped 0.1 percent to 100.040

, after falling to 99.899 on Monday, its lowest since December 8.

The dollar was up 0.1 percent at 112.84 yen but

notched a low of 112.52 earlier in the session, its weakest

since Nov. 30, and well below its overnight high of 114.45.

Trump formally withdrew the United States from the now

11-nation Pacific Rim Trans-Pacific Partnership (TPP),

distancing America from its Asian allies. He has also said he

intended to renegotiate the NAFTA free trade agreement between

the United States, Canada and Mexico.

"The market doesn't like this increased protectionist

stance. For now, at least, it's reassessing the impact of that

relative to the pro-investment stance that drove the US dollar

higher," said Sue Trinh, head of Asia FX strategy at Royal Bank

of Canada in Hong Kong.

"It's now just watching and waiting, with headline risk, to

see Trump's first 100 days as we get greater clarity around his

policies and around his cabinet, all of these are likely to

inject greater volatility into the market," she said.

Lower US Treasury yields also undermined the dollar. The

benchmark 10-year yield posted its biggest one-day drop in more

than two weeks as concerns about the fallout of Trump's tough

stance on trade spurred safe-haven demand for bonds.

"We saw dollar weakness in conjunction with those falling

yields, and it led to a strengthening of the yen," said Bill

Northey, chief investment officer of the private client group at

US Bank in Helena, Montana.

"Much of it was based on non-economic news. We saw the US,

through executive action, withdraw from the TPP, which brings up

some broader questions about the degree of trade protectionism

that we might see out of the new administration," he said. "That

certainly played into today's activity."

Trump's nominee for Treasury Secretary Steven Mnuchin was

quoted by Bloomberg as saying that an excessively strong dollar

was negative in the short term, which put additional pressure on

the dollar.

Mnuchin has told senators that he would work to combat

currency manipulation but would not give a clear answer on

whether he currently views China as manipulating its yuan,

according to a Senate Finance Committee document seen by Reuters

on Monday.

China's yuan firmed against the dollar on Tuesday after the

central bank fixed the official yuan midpoint at the

strongest level in more than two months, in the wake of the

dollar's broad slide.

Also adding to investors' risk-averse mood, the Trump

administration vowed on Monday that the United States would

prevent China from taking over territory in international waters

in the South China Sea, something Chinese state media has warned

would require Washington to "wage war".

The euro edged down 0.1 percent to $1.0754, after

earlier touching $1.0774, its strongest level since December 8.

The dollar's weakness gave an additional lift to sterling,

which scaled six-week peaks as investors bet Britain's Supreme

Court would rule later on Tuesday that the government needs

parliamentary approval to trigger formal talks about the

country's exit from the European Union.

The pound was slightly lower on the day at $1.2520

after earlier touching $1.2538, its loftiest level against the

dollar since December 15.

REUTERS

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