The dollar fell to a 1-1/2 month low against an index of the world’s other top currencies on Monday, after US President Donald Trump struck a protectionist tone in his inauguration speech.
The index, which measures the greenback against six major rivals, fell half a per cent to 100.28, while it dropped more than 1 per cent to 113.440 yen and 0.35 per cent to $1.0755 per euro.
“Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and families,” Trump had said in Washington on Friday. “...Protection will lead to great prosperity and strength.”
The speech was then followed over the weekend by coordinated protests in US cities, testy exchanges between members of Trump’s top staff and US media and a signal from the president that he would begin renegotiating the North American Free Trade Agreement.
His administration also said it intends to withdraw from the Trans-Pacific Partnership (TPP) trade pact.
TPP, which the United States signed but has not ratified, had been the main economic pillar of the Obama administration's “pivot” to the Asia-Pacific region in the face of a fast-rising China.
Sterling was the other big gainer among developed-market currencies, hitting a five-week high as investors bet Britain’s Supreme Court would on Tuesday rule the government needs parliamentary approval to trigger formal Brexit talks.
Sterling climbed as much as 0.8 per cent to $1.2472, its strongest level since December 19.
“People had expected some kind of repeat of his (Trump’s) victory speech in November, but it was a bit confrontational and has sparked some concerns in the markets that he is going to play hard ball,” said Rabobank’s US focused strategist Philip Marey.
“It was quite straight forward: buy American, hire American... so it’s clear what route he is taking.”
The dollar index rose around 4.2 per cent between Trump’s election in November and the end of last year, but it has given back over 2.5 per cent of that gain since then, having fallen for nine of the 16 trading sessions this year.
Against the yen this year’s fall has been 3 per cent.