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Dollar Moderately Lower on Trump Jawboning Jitters

25 Jan 2017 5:20 am
   By Hiroyuki Kachi 

The dollar was moderately lower against the yen in Asian trade on Wednesday, with investors reluctant to drive it higher amid caution about potential jawboning to stem a stronger dollar from Donald Trump and his administration.

The greenback weakened to Y113.48 around 0450 GMT after struggling to rise earlier in the session. That compared with Y113.77 late Tuesday in New York.

The WSJ Dollar Index, a measure of the U.S. dollar against a basket of major currencies, was down 0.03% at 91.05. The euro was flat at $1.0734 midday from $1.0733 late Tuesday.

Many worry that U.S. President Donald Trump's protectionist approach on trade could hurt economic growth, as he kicked off his presidency this week by signing an executive order pulling the U.S. from the Trans-Pacific Partnership. But market sentiment has brightened a little, on news that Mr. Trump took steps to revive oil pipeline projects that had been rejected by the Obama administration.

The improved sentiment helped the Nikkei Stock Average rise 1.2% at midday.

After touching a high of Y113.99 early, the dollar drifted lower for the rest of the session, in a sign that many are still skeptical about Mr. Trump's policy prescriptions.

"Basically, I expect upside momentum" for the dollar, said Toshihiko Sakai, senior manager of forex and financial products trading division at Mitsubishi UFJ Trust and Banking. "After all, the comprehensive policy stance of the Trump administration remains to be seen," said Mr. Sakai.

Earlier Wednesday, government data showed Japan recorded its first trade surplus in six years in 2016, while its $60 billion trade surplus with the U.S. last year was its largest with any nation.

Mr. Trump has singled out the Japanese auto industry in his criticism. He said Japan has put up non-tariff barriers to U.S. auto makers, while benefiting from strong sales of its cars in the U.S.

For Tokyo, "diplomacy with the U.S. is extremely important," said SMBC Nikko FX strategist Makoto Noji in a note. A fierce riposte could prompt the U.S. to embark on a major offensive, for example, by calling Japan a currency manipulator, he said. Likewise, when relations have been cosy between administrations and their respective currency officials, the pressure for the yen to rise has typically weakened.

The Australian dollar fell to $0.7545 and Y85.62, respectively, from $0.7582 and Y86.27, as lower-than-expected inflation in Australia created room for the central bank to lower interest rates again if the economy loses momentum.

Australia's consumer prices rose by 0.5% in the fourth quarter and were up 1.5% from a year earlier, compared with expectations for a rise of 0.7% in the quarter and 1.6% from a year earlier. The Reserve Bank of Australia targets annual inflation of between 2% and 3%.

Among other currency trades, the euro was lower at Y121.83 from Y122.15 late Tuesday.
Interbank Foreign Exchange Rates At 23:50 EST / 0450 GMT 
                           Latest       Previous   %Chg    Daily    Daily   %Chg 
Dollar Rates                               Close            High      Low  12/31 
USD/JPY Japan           113.47-48      113.78-79  -0.27   113.99   113.40  -3.01 
EUR/USD Euro            1.0733-36      1.0731-34  +0.02   1.0740   1.0722  +2.04 
GBP/USD U.K.            1.2518-20      1.2520-22  -0.02   1.2543   1.2510  +1.41 
USD/CHF Switzerland     1.0007-11      1.0007-11   0.00   1.0021   1.0004  -1.77 
USD/CAD Canada          1.3130-35      1.3155-60  -0.19   1.3165   1.3123  -2.30 
AUD/USD Australia       0.7544-48      0.7581-85  -0.49   0.7598   0.7535  +4.78 
NZD/USD New Zealand     0.7245-51      0.7245-51   0.00   0.7261   0.7231  +4.66 
Euro Rate 
EUR/JPY Japan           121.79-83      122.09-13  -0.25   122.28   121.70  -1.05 
Source: Tullett Prebon 

Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com

(END) Dow Jones Newswires

January 25, 2017 00:20 ET (05:20 GMT)

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