Dollar hits 6-month low on weak housing data, political turmoil
The U.S. dollar index touched its lowest since early November on Tuesday, hurt by weaker than expected U.S. housing data and concerns after political turmoil once more hit Washington.
A rally in the euro was reinforced by dollar losses, prompted by allegations that U.S. President Donald Trump disclosed highly classified information to Russia’s foreign minister about a planned Islamic State operation.
The story about Trump and Russia “probably is playing out as a weaker dollar on the view that Trump may not be around long enough to deliver his tax reform, which is at least partially priced into the dollar,” said RBC Capital Markets currency strategist Adam Cole, in London.
The dollar index fell 0.65 percent, with the euro up 0.91 percent to $1.1073.
The dollar index had reached 14-year highs in early January on the view that Trump’s plans for tax cuts and infrastructure spending would boost growth and inflation, but it fell to six-month lows on Tuesday.
The Japanese yen strengthened 0.49 percent versus the greenback at 113.24 per dollar, while Sterling was last trading at $1.291, up 0.13 percent on the day.
On Wall Street, the S&P 500 and Nasdaq Composite touched record highs but later retreated to trade slightly negative. Traders shared concerns about the feasibility of the Trump agenda of tax cuts and deregulation, without taking their eye off the expected economic growth.
“As long as we have growth, whether it is earnings or economic data, the markets are likely to be able to take such (political) headlines in stride,” said Matt Miskin, senior capital markets research analyst at John Hancock Investments in Boston, referring to the Trump-Russia headlines.
U.S. manufacturing production posted its biggest increase in more than three years in April, bolstering the view that economic growth picked up early in the second quarter – despite a drop to a five-month low in housing starts.
