Business World

Friday 16 November 2018

Dollar hits low on fears Trump tax plan won't boost sentiment

US Treasury Secretary Steven Mnuchin and wife Louise Linton hold an uncut sheet of new dollar notes as boss Donald Trump has succeeded in pushing his revamp of the tax system through Congress
US Treasury Secretary Steven Mnuchin and wife Louise Linton hold an uncut sheet of new dollar notes as boss Donald Trump has succeeded in pushing his revamp of the tax system through Congress

Jemima Kelly

The dollar slipped to a four-week low against a basket of currencies, kept under pressure by a recent dip in US 10-year bond yields, while volatile Bitcoin came under renewed pressure after a 30pc fall in less than two weeks.

The dollar index, which measures the greenback against a basket of six major currencies, slipped as much as half a percent yesterday to its weakest since December 1.

The US currency has dropped more than 9pc this year, putting it on track for its biggest annual slide since 2003. The dollar had started the year on a high, hitting its strongest in 14 years on hopes that new US president Donald Trump would implement pro-growth, pro-inflation measures.

But it has fallen on worries that Trump would not succeed in pushing through those policies, and as other countries' central banks have moved towards tightening monetary conditions, lessening the divergence between the US Federal Reserve's policy and the rest of the world.

The Republican-controlled US House of Representatives gave final approval this month to the biggest overhaul of the US tax code in 30 years, which gave the dollar some support, but markets are not confident that the tax reform will feed through quickly into increased consumer confidence.

"The partisan way in which the (tax) legislation was pushed through Congress is likely to make consumers a bit sceptical about the impact on the economy," said MUFG macro strategist Derek Halpenny, in London. "It's going to be a while before consumers become convinced there is something beneficial in it."

South Korea is considering closing exchanges amid a Bitcoin frenzy
South Korea is considering closing exchanges amid a Bitcoin frenzy

The US 10-year Treasury yield stood at 2.437pc - its biggest one-day fall in almost four months on Wednesday.

"The flattening of the US yield curve is highlighting the fact that the market is not getting too enthusiastic about growth prospects for 2018, despite the tax reform legislation being signed," added Halpenny.

The euro rose almost half a percent to $1.1946, its highest in a month. The single currency has gained more than 13pc so far this year, well on the way to its best annual performance since 2003.

Sterling also benefited from the dollar's weakness, gaining as much as half a percent to hit a two-week high of $1.3456.

The pound is on track for its best year against the dollar since 2009, with a more than 9pc climb, though it is still down more than 10pc since last year's vote in Britain to leave the European Union.

Bitcoin, the biggest and best-known cryptocurrency, has dwarfed any gains in traditional financial markets this year, with a more than 1,400pc rise. But since hitting record highs around $20,000 11 days ago, it has been falling sharply.

It fell around 7pc to trade just above $14,000 on the Luxembourg-based Bitstamp exchange.

Earlier yesterday, South Korea's government said it would impose additional measures to regulate speculation in cryptocurrency trading.

South Korea said it was eyeing options including a potential shutdown of at least some cryptocurrency exchanges to stamp out a frenzy of speculation.

South Korea has been ground zero for a global surge in interest in Bitcoin and other digital currencies as prices surged this year. This has prompted the nation's prime minister to worry over the impact on Korean youth. (Reuters)

Irish Independent

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