Donald Trump's comment on 'stronger' US greenback sinks Australian dollar
Updated
Although the ASX is closed for Australia Day, there was no shortage of suspense in volatile currency markets overnight.
Market snapshot at 10:00am (AEDT):
- ASX SPI 200 futures -0.2pc at 5,985, ASX 200 (Thursday's close) -0.1pc at 6,050
- AUD: 80.11 US cents, 56.66 British pence, 64.69 Euro cents, 87.82 Japanese yen, $NZ1.10
- US: Dow Jones +0.5pc at 26,393, S&P 500 +0.1pc at 2,839, Nasdaq -0.1pc at 7,412
- Europe: FTSE -0.4pc at 7,616, DAX -0.9pc at 13,298, Euro Stoxx 50 -0.5pc at 3,627
- Commodities: Brent crude -0.7pc at $US70.04/barrel, spot gold -0.9pc at $US1,347.27/ounce
Trump sinks the Aussie dollar
The Australian dollar fell sharply back to 80.11 US cents after US President Donald Trump's latest comments at the World Economic Forum in Davos.
Mr Trump said on Friday morning (AEDT) that he ultimately wanted the US dollar to be strong.
This contradicted comments made by his treasury secretary Steven Mnuchin the previous day, which caused the greenback to suffer its biggest one-day drop in seven months.
Mr Mnuchin said he "welcomed" a weaker US dollar as it would be good for "trade and opportunities".
However, the US President had a different view.
"The dollar is going to get stronger and stronger and ultimately I want to see a strong dollar," Mr Trump said.
His treasury secretary's comments had been "taken out of context", Mr Trump said in his interview with CNBC.
The President also said his country was "becoming so economically strong again, and strong in other ways".
Yesterday, the Australian dollar traded as high as 81.17 US cents.
It was trading just below 81 US cents around the time Mr Trump made those comments.
Then in just one hour, the local currency fell by 1 per cent (or 0.8 US cents).
Regardless, the Aussie dollar is still at a strong level — around a four-month high.
ECB chief criticises US currency moves
Prior to Mr Trump's remarks, the euro was trading at a three-year high against the greenback.
Since then, the euro has fallen by 0.1 per cent to $US1.24.
The US dollar had been heading downwards this week thanks to trade protectionism concerns sparked by Mr Trump's decision to impose steep tariffs on imported washing machines and solar panels earlier this week.
Overnight, European Central Bank (ECB) president Mario Draghi criticised the US for "jawboning" the greenback.
His comments were directed towards Mr Mnuchin's attempts to talk down the greenback on Thursday.
Mr Draghi said this was a move which threatened a decades-old pact not to target the currency, and might force his bank to change its own policy.
"That agreement [about not targeting the exchange rate], as subtle as you want, has been in place for decades now," Mr Draghi said.
The ECB is concerned because any big rises in the euro could cut have an adverse impact on inflation.
This is turn could potentially reverse the impact of the monetary stimulus the ECB had been injecting into the Eurozone over the past three years.
Mr Draghi also pushed back on interest rate hike expectations, arguing there was almost no chance of a move this year — even as some investors were betting on a rise as early as December.
What happened on Wall Street?
Most S&P sectors finished in positive territory — with the biggest winners being utilities and healthcare.
The sectors which posted losses were energy, financials, consumer cyclicals and technology.
Overall, it was a choppy trading session with the S&P 500 and Nasdaq diving in and out of negative territory.
The fall in technology stocks led to Apple falling (-1.8c) and resulted in a weak day for the Nasdaq index, which fell by 0.1 per cent.
The broader S&P 500 index ultimately closed 0.1 per cent higher to post a fresh record.
As for the Dow Jones Industrial Average, it rose 0.5 per cent, also another record high.
Robust quarterly earnings reports have helped propel major Wall Street indexes to a strong start this year.
Earnings growth for the benchmark S&P 500 is expected at 12.7 per cent.
Of the 118 companies in the index that have posted results, 78.8 per cent have topped expectations.
First posted
