The U.S dollar, Wednesday 25, dropped to a seven-week low against a basket of currencies on concerns that U.S. President Donald Trump was not focusing enough on pro-growth policies.
The biggest gainer among major currencies was sterling, which skipped above $1.26 for the first time in six weeks on hopes for a trade deal between Britain and the United States, which UK Prime Minister Theresa May said on Wednesday would put “put UK interests and UK values first.”
The dollar index – which measures the greenback against a basket of six other major currencies – fell half a percent to 99.835 .DXY, its lowest since Dec. 8, leaving it almost 4 percent down from a 14-year high hit at the start of 2017.
“What we’ve seen this year is more of a focus on the isolationist, protectionist policies of Trump. The market had chosen to ignore those last year, but now focus has swung back … Protectionism is usually detrimental to growth,” said Rabobank currency strategist Jane Foley in London. The Australian dollar fell as much as 0.8 percent AUD=D4 after both quarterly and annual inflation undershot expectations, rekindling hopes of one more cut in interest rates.
“It is not so surprising to see a lower inflation number get a lot more attention,” said Barclays strategist Hamish Pepper.
“The risk is that the RBA (Reserve Bank of Australia) will have to do more with policy to generate inflation. Despite the fact that they don’t sound particularly panicked, they are also probably a bit disappointed by how the non-mining sector has not picked up.”
The Aussie, which has been rallying along with equity markets since early November but is still well short, Reuters reports.