Dollar Remains near 7-Week Lows vs. Other Majors

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On Thursday, the greenback struggled near seven-week lows  compared to the other major currencies, as worries over U.S. President Donald Trump’s protectionist strategies, including an executive order to build a U.S.-Mexican border wall weakened dollar.

Trump on Voting Investigation

The greenback was generally weaker in spite of U.S. shares gaining and the Dow Jones Industrial Average  closing atop the 20,000 spot for the first time The dollar index, which tracks the dollar against a basket of major currencies, previously down 0.2% at 99.839. It plunged to 99.835 on Wednesday, its lowest level since Dec. 8.

The greenback destabilized after U.S. President Donald Trump stated on Twitter that he would seek a “major investigation” into assumed voter fraud, concentrating on two states and illegal voters.

The call came in spite of Republican elected representatives in key states saying they have found no evidence of deceitful voting.

The National Association of Secretaries of State said on Tuesday,  it had confidence in the “systemic integrity of our election process” and was not aware of any evidence related to Trump’s statements.

Since Trump’s inauguration last Friday, the greenback has been under pressure and worries about the lack of  transparency on his economic policies and doubts that his protectionist trade stance could hit corporate incomes and act as a strain on growth.

Against the Majors

EUR/USD inched up 0.10% to 1.0742, not far from Tuesday’s six-week high of 1.0775.

In Asia, 4th quarter inflation in New Zealand increased 1.3% year-on-year and 0.4% quarter-on-quarter, both beyond expectations with the NZD/USD down 0.12% to 0.7284 after the data, although Japan reported the corporate services price index increased 0.4% in December as projected.

In Japan, data on Wednesday indicated that exports increased for the first time in 15 months in December.  USD/CHF inched down 0.14% to trade at 0.9994.

On Wednesday, the Australian Bureau of Statistics reported that the consumer price index increased  0.5% in the 4th quarter of 2016, disappointing prospects for an increase of 0.7%.

President  Trump wants to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico.

Temporarily, USD/CAD retreated 0.49% to trade at 1.3093, the lowest since January 18. After Trump tweets  “we will build the wall” the Mexican peso is increasing. It is up by 0.4% at 21.4400 per dollar as of 8:08 a.m. ET.

In pairs, USD/JPY increased 0.04% to 113.31, while GBP/USD gained  0.08% to 1.2644. AUD/USD traded at 0.7572, down 0.04%. The pound established support as investors expected the government’s bill to activate Article 50 and start the formal procedure of exiting the EU.

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Bank of Japan seen Holding Off on Easing, Trump Presidency Adds Improbability

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The BoJ is anticipated to wait until the middle of next year before accepting additional stimulus gauges, although Donald Trump’s election as U.S. president enhances uncertainty to the economic outlook, a poll found on Friday.

Approximately 90% of economists surveyed in the past week stated the BOJ’s next policy action would be to adopt additional easing measures. Others stated an unwinding of the central bank’s ultra-easy monetary policy was likely.

“Sharp spikes in the yen against the dollar are unlikely to happen for a while as the Federal Reserve is seen raising rates as expected. This means the BOJ is expected to stand pat,” said Izuru Kato, chief economist at Totan Research.

Fifteen of 25 economists who replied a separate timing question anticipated, the Bank of Japan to wait until the 2nd half of 2017 before increasing its already massive stimulus.

Five stated a change at the April meeting was possible, while three nominated the January meeting. One each picked the meetings in December and March.

The majority of economists replied to the poll before the outcome of the U.S. presidential election.

“But there is a chance that worries over the outlook will grow because the formal announcement of policies under a new administration in the U.S. will come later, so we need to monitor it closely,” Kato added.

Trump’s key policies are seen likely to include improved infrastructure spending, in turn leading to higher inflation, however,  there are worries over trade policy and geopolitical alliances.

In the short term, much will depend on the U.S. Federal Reserve, which is anticipated to continue with a rate hike in December  in spite of the shock Trump win, a separate poll presented on Wednesday.

If the Fed hikes the upcoming month, it will likely increase the U.S. dollar and dent the Japanese yen which traded approximately 106.60 per dollar on Friday, close to 3-1/2-month low, after increasing as high as 101.19 on Wednesday as Trump’s success became more apparent.

In the election, 19 economists stated that the central bank would reduce its -0.1% interest rate more when it next chooses to ease policy, and six expected it would reduce both the interest rate and the 10-year Japanese government bond yield goal.

Six economists stated the Bank of Japan would surge its purchases of exchange-traded funds/real estate investment trusts and four replied that it would increase its purchases of commercial paper and corporate bonds. This question permitted multiple answers.

The consensus from the broader poll found the Bank of Japan will hold the -0.1%  interest rate it carry out on some excess bank reserves steady and will also stay its 10-year JGB yield goal of approximately zero percent throughout next year.

The Bank of Japan is perceived keeping its yearly pace of increase in the amount of outstanding of JGB holdings at approximately 80 trillion yen, however, some analysts say the central bank could lower the figure to approximately 70-75 trillion yen in the coming year and may even drop a reference to the target amount in its policy statement.

“Asked whether the government should announce an extra budget for this fiscal year to March, 19 out of 26 economists said it should not, but some of those said the government was likely to do so. Seven analysts in the poll said the government needed to spend more,” according to the reports.

“Many countries including Japan, the U.S., China and in Europe will possibly shift towards fiscal policy from monetary policy as central banks are running out of steps to take,” said Nobuyasu Atago, chief economist at Okasan Securities.

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