US dollar slides with Trump agenda in doubt

The US dollar touched its weakest level versus the euro in 14 months.
The US dollar touched its weakest level versus the euro in 14 months. PHOTO: AFP

NEW YORK (BLOOMBERG, REUTERS) - The US dollar touched its weakest level versus the euro in 14 months on Tuesday (July 18) after US Senate Republicans' drive to repeal Obamacare appeared headed for failure, dimming hope for other parts of the Trump administration's agenda, including tax cuts.

The greenback sank versus nine of its G-10 peers and was down 0.5 per cent as measured by the Bloomberg Dollar Spot index at 2.15pm ET. The euro climbed as much as 0.9 per cent to 1.1583, the highest since May 2016.

Traders also remained doubtful the Federal Reserve would be able to raise interest rates again this year, while other central banks including the European Central Bank and Bank of England have signalled a more hawkish bent towards tightening policy. Friday's weak reading on US inflation and retail sales fanned speculation the Fed may not have justification for another rate hike by the end of this year, despite policymakers'projection for such a move.

"The setback for Trump is a setback for the US dollar,"said Kathy Lien, managing director at BK Asset Management in New York. "Based upon the failed repeal of Obamacare, I think that really casts doubt on the Trump administration's broader strategies."

The euro touched US$1.1583 against the dollar, its strongest since early May 2016, with analysts noting traders who had "shorted" or bet against the euro were being forced to "cover" or repurchase the currency.

The euro's 0.7 per cent increase, as of afternoon US trading, last put it on course for its biggest one-day percentage gain in three weeks.

The dollar index, which measures the greenback against a basket of six major rivals, touched its lowest level since early September 2016 of 94.476.

The dollar touched 0.9525 franc, its lowest against the Swiss currency since late June 2016, while the dollar hit a three-week low against the Japanese yen of 111.69 yen.

The dollar index has fallen 7.4 per cent since the start of the year, partly on the doubts over Trump's fiscal stimulus agenda, with much of the downdraft starting in early March.

The Australian dollar was a beneficiary of the greenback's weakness on Tuesday and surged to a more than two-year high of US$0.7942.