Published: Fri, April 14, 2017
Business | By Max Garcia

Trump Says The US Dollar Is Too Strong, And It's His Fault

Against such a backdrop, slapping a currency manipulator tag on China could be counter-productive as it would not only harm the strategic mutual trust between the two countries but also harm bilateral trade relations - the ballast of bilateral ties - and increase the volatility of global markets. This will weigh on Asian equity market's sentiment.

USA futures pointed to a slightly lower open on Wall Street too.

But there are compelling reasons why recent administrations have tried to avoid commenting on the dollar: Other countries can interpret loose talk as an effort to manipulate the vital currency.

Trump's remarks went against a long-standing practice of both U.S. Democratic and Republican administrations refraining from commenting on policy set by the independent Federal Reserve.

The dollar index, which tracks the greenback against a basket of six trade-weighted peers, was up 0.5 percent, following a 0.6 percent decline on Wednesday that was the biggest fall in three weeks.

The yield on the benchmark USA 10-year note fell to 2.25 percent from 2.32 percent late Tuesday.

Meanwhile, China's exports in March surged 16.4 per cent from a year earlier in USA dollar terms, reversing a 1.3 per cent drop a month earlier and generating a trade surplus of US$24 billion. The precious metal was fractionally higher at $1,286.84 an ounce, near its highest level in five months, after jumping nearly 1 percent on Wednesday.

Among the stocks that helped pull the market lower Tuesday was Tractor Supply, which sank 8.3 percent.

By early afternoon, however, sterling remained 0.39% and 0.26% higher against the greenback and the euro respectively, trading at $1.2540 and €1.1783. The People's Bank of China (PBoC) has guided the yuan (¥6.8651 a +0.4%) to its biggest one-day advance against the dollar in almost three-months. The shrinking premium of long-dated yields over shorter-dated ones hurts banks' profitability.

Backing away from a campaign pledge, President Donald Trump said Wednesday that his administration won't label China a currency manipulator in a report due this week, though he does think the USA dollar "is getting too strong".

Although Trump was highly critical of central bank chief Yellen during the campaign, and indicated he would not nominate her to another four-year term as chair, he backed away from that position. It gained 0.23 percent against the dollar for the week. Just last week, Trump called China the "world champions" of currency devaluation.

Data overnight showed that China's Trade Balance rebounded to a surplus after last month's surprise deficit.

As European trading got underway, the dollar clawed back some of its earlier losses. Gold spiked to levels unseen since before the United States election.

"I think the price action in core yields is mainly shaped by the rising geopolitical concerns but also French election nerves increasing safe-haven flows", said ING strategist Martin Van Vliet.

In commodities, oil prices fell as concerns about rising USA output continued to weigh on markets.

USA crude slipped 0.1 percent to $53.05 a barrel, extending Wednesday's 0.5 percent loss that saw it break a six-session winning streak.

Global benchmark Brent crude settled down 0.7 percent at $55.86 a barrel, while U.S. crude settled down 0.5 percent at $53.11. A lower dollar could lend support to sectors and asset classes battered by the 24-per-cent gain over the past five years.

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