May 18, 2017 5:33 am JST

Dollar falls to pre-election levels

Political woes stall Trump's economic agenda, worry market

TOKYO -- The U.S. dollar has retreated back to levels seen around the time of the U.S. presidential election in November, on growing concerns over President Donald Trump's ability to enact his economic agenda.

The U.S. Dollar Index measures the strength of the greenback against six main currencies. The index was around 98 on on Nov. 8, 2016, the day of the presidential election. But from the end of 2016 through the beginning of 2017, it rose to its highest level in 14 years at 103. On Tuesday, the index returned to 98.

In April, the yen had firmed to the low 108 yen-range against the dollar, but temporarily softened on speculation that the U.S. Federal Reserve would raise interest rates, expanding the Japan-U.S. rate differential. The yen is now regaining strength, reaching the lower 111 yen-range in New York on Wednesday.

If Trump's policies are perceived as stagnating, the U.S. economy will start to soften, said Daisuke Karakama at Mizuho Bank. "There is a possibility that by the end of June, the yen will strengthen to the 107 range," predicts the market economist, who is skeptical about whether the U.S. will continue to hike interest rates.

Until now, the U.S. stock market has barely budged on news surrounding Trump's murky relationship with Russia. Stocks fell sharply, however, in reaction to reports that the president asked former FBI director James Comey to drop the federal investigation into former national security adviser Michael Flynn's ties with Russia.

Concerns spread in the U.S. market on Wednesday due to the possibility that impeachment or resignation pressures could strengthen, according to Jeremy Klein of FBN Securities.

At the Tokyo Stock Exchange Wednesday, export-related stocks fell as the firmer yen emerged as a factor that will push down corporate earnings. The Nikkei Stock Average slipped 0.5% from Tuesday to 19,814. The strong yen, along with tumbling U.S. stock prices, could intensify downward pressures on Japanese stocks Thursday.

(Nikkei)

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