LONDON • The US dollar stayed on the defensive in Asia yesterday, with bulls still nursing a grudge after the Federal Reserve's rate guidance last week proved to be less "hawkish" than many had wagered on.
The greenback has been on the retreat since the US Federal Reserve raised interest rates last Wednesday, but stopped short of predicting a sharper acceleration in monetary tightening over the next two years.
Yesterday, it fell for the fourth day running against the basket of currencies used to measure its broader strength, as reaction to a G-20 summit dominated by the Trump administration's protectionist bent extended last week's sales.
The US dollar index fell by as much as 0.3 per cent in Asian and early European trading, before recovering some ground to stand just 0.1 per cent weaker on the day at 100.19. It was flat at 112.74 yen and 0.2 per cent weaker against the euro at US$1.0761. It was trading US$1.3982 against the Singdollar.
The logic so far on the Trump administration's protectionist leanings on trade are that, by imposing a new round of tariffs and taxation on imports, it would broadly support the dollar.
But a number of US banks are now openly expressing doubts about how fast any border-tax reform will come into being, or whether it will ever pass Congress at all in a form that would have a significant impact on pricing and the US dollar.
Meanwhile, gold prices hit a two-week high yesterday as the greenback slumped.
Spot gold rose 0.5 per cent to US$1,234.60 per ounce by 0735 GMT, after earlier touching US$1,235.50 an ounce, its highest since March 6.
US gold futures gained 0.3 per cent to US$1,234.10.
Gold prices have rebounded more than US$35 from its low hit before the policy decision to boost rates last Wednesday, while the dollar has fallen 1.7 per cent from its high of 101.71 hit the same day.
Fed chairman Janet Yellen's cautious guidance last week had investors pricing in almost no chance of another rate rise at the next policy meeting in May and is seen rising to 50-50 for June.
"The market was geared for a hawkish FOMC and the Fed was really dovish. There was a lot of short-covering. People are now putting gold back on the plate and are more comfortable," said a precious metals trader based in Hong Kong.