The dollar traded higher than its recent lows against major rivals on Friday. This followed US President Donald Trump’s statement that he wanted a “strong dollar.” The statement was a contradiction to the comments made by Treasury Secretary Mnuchin.
During an interview in Davos on Thursday, Trump said that he ultimately wants a strong dollar. He added that Mnuchin’s statements were misinterpreted.
With the dollar’s comeback, it was able to stop records from going any further. The euro was taken away from its three-year highs and removed the sterling from its strongest levels since June 2016. The greenback was steady against the yen with price above a four-month low set on Thursday.
The dollar index is used to measure the strength of the greenback against a trade-weighted basket of six major currencies. It last traded at 89.176, still above a three-year low of estimated 88.43 recorded this week. So far, the dollar index slipped more than 3 percent in January.
The euro last traded at $1.2424, climbing 0.2 percent on the day. It was still below Thursday’s high of $1.2538.
It rose to that level following the statement of European Central Bank President Mario Draghi. He said that economic data was pointing to “solid and broad” growth with inflation likely to rise in the medium term.
Draghi also sent a warning, saying that the surge in the euro was a source of uncertainty. He then added that the ECB might have to review strategy if US comments on the benefits of a weak dollar lead to a change in monetary conditions.
The Sterling rose to $1.4191, rising 0.4 percent. Despite this, it was still well-below Thursday’s peak of $1.4346, the pound’s highest level since the Brexit vote in June 2016.
The dollar was steady against the yen at 109.42 yen.
Market Speculations on the Dollar
Other market participants doubted whether the president’s comments will be enough to change the recent weak dollar trend.
“The market forces, fundamentals all suggest that the dollar should weaken over the course of 2018,” said investment strategist Roy Teo.
Later on Friday, it is expected that Trump will address the World Economic Forum in Davos.
Market participants speculated that the greenback faced headwinds due to its relative yield attraction being seen at risk the same time the world’s major central banks are seen wrapping up their stimulus. Such actions will lead to changes in the interest dynamics of the past few years.
Another factor that weighed down on the dollar was the concerns over US protectionism.
“My view is that the Trump trade policies, which I think are still going to be maintained, favour a weaker dollar,” stated trading head Stephen Innes.
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