'Too strong and it's killing us': Trump comments send US dollar sliding

The US dollar tumbled against currencies on Tuesday (Jan 17).
The US dollar tumbled against currencies on Tuesday (Jan 17).PHOTO: BLOOMBERG

NEW YORK (AFP, REUTERS) - The US dollar tumbled against currencies on Tuesday (Jan 17) after President-elect Donald Trump said the greenback was "too strong" and "it's killing us".

A sell-off in the dollar deepened after US traders returned from a long weekend after Martin Luther King Jr Day and reacted to Mr Trump's weekend comments.

In an interview with the Wall Street Journal published on Monday, Mr Trump said US companies "can't compete with (China) now because our currency is too strong and it's killing us".

A stronger dollar has the potential to hurt US companies that sell products abroad by making their goods more expensive.

Mr Trump's comments sent the US dollar index sliding 1.2 per cent to 100.35, a low it hasn't hit since early December. The index measures the greenback relative to a basket of six other major world currencies.

The dollar is still up 2.2 per cent since his election win on Nov 8.

The dollar was further buffeted by his criticism in the same Journal article of a Republican plan in Congress to enact a border tax adjustment that has been seen as supporting a strong dollar.

"On balance, with just four business days until Mr Trump's inauguration, global financial markets are beginning to pare back some of the initial optimism surrounding the election of Donald Trump," said Mr Omer Esiner, analyst at Commonwealth Foreign Exchange.

The dollar had surged at the end of 2016 on expectations that Mr Trump's proposed fiscal stimulus boost growth and inflation. But on the other hand, Mr Trump has also continued to strike a harsh tone toward Beijing, and his protectionist rhetoric is beginning to play a larger role in investors' expectations.

"If the US government officials further talk down the dollar, the greenback could weaken and the correlation to the interest rate differentials may end," said Junya Tanase, chief forex strategist at JP Morgan in Tokyo.

The dollar on Wednesday morning added 0.2 per cent to 112.79 yen, after hitting a seven-week low of 112.60 yen on Tuesday. The yen has strengthened for seven straight sessions.

The euro last stood at US$1.07064, slightly below US$1.07195 hit on Tuesday, its highest level since Dec 8.

The pound, meanwhile, slipped 0.3 per cent to US$1.2382, after it rallied 2.9 per cent against the US currency on Tuesday, the biggest one-day percentage gain since at least 1998, after British Prime Minister Theresa May's speech.

Mrs May pledged to hold a parliamentary vote on whatever deal Britain eventually reaches to leave the European Union. As expected, Mrs May said Britain will pull out of the European Union's single market when it exits the bloc and not look for a compromise deal to retain some of its benefits.

Investors' next focus is on US Federal Reserve chair Janet Yellen's speech later on Wednesday.