Forex: Euro hits lowest in 6-1/2 months vs dollar on tariff anxieties
11/11/2024 15:42
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The euro hits a 6-1/2-month low versus greenback
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Dollar slightly overshoots levels seen after U.S. vote
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Mixed views by investors who wait for clarity on U.S.
policies
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Offshore yuan drops to lowest since early August
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(Updates at 1530 GMT)
By Hannah Lang and Stefano Rebaudo
Nov 11 (Reuters) -
The euro dropped to its lowest level in 6-1/2 months against
the greenback on Monday as investors worried about possible U.S.
tariffs that would hurt the euro area's economy.
Meanwhile, the U.S. dollar index -- a measure of its
value relative to a basket of foreign currencies -- slightly
overshot the highs seen right after the U.S. presidential
election with markets still waiting for clarity about future
U.S. policy.
"It does feel like the markets are pricing in a red wave
more and more. I think the dollar is the beneficiary of that,"
said Bipan Rai, managing director at BMO Global Asset
Management.
The sensitivity of the euro to the threat of higher U.S.
import tariffs was evident late on Friday when media reported
that President-elect Donald Trump was lining up Robert
Lighthizer, seen as a hawk on trade, to run his trade policy,
analysts said.
Sources familiar with the matter said Trump has not
asked
Lighthizer
to return to the agency overseeing trade policy.
The single currency EUR=EBS was down 0.7% at $1.0643.
It dropped 0.78% on Friday.
Politics remained under the spotlight after German
Chancellor
Olaf Scholz
cleared the way for snap elections.
The dollar index =USD was 0.56% firmer at 105.59,
after hitting 105.50, its highest since July. Last week, it
jumped more than 1.5% to 105.44, after U.S. election results
showed Trump's victory.
MIXED VIEWS
Trump "will be less encumbered by the political
considerations of having to run for office again", said Libby
Cantrill, head of U.S. public policy at PIMCO.
"However, what look to be narrow congressional margins –
potentially historically narrow in the House – could be a check
on Trump's agenda, fiscal and otherwise," she added.
Measures from the U.S. President-elect -- including
tariffs and tax cuts -- should put upward pressure on inflation
and bond yields while limiting the Fed's scope to ease policy
and supporting the greenback.
"One of the key questions after the election is, what's
going to be at the top of the legislative agenda for the Trump
administration? And it feels more and more like it's going to be
tariffs, which, of course, he can pretty much push through
without needing Congress on his side to help him do that," said
Rai.
The dollar gained 0.79% on the yen to 153.84 JPY=EBS ,
having been dragged off last week's top of 154.70 by the risk of
Japanese intervention. On Nov. 6, it hit 154.68, its highest
level since July.
A summary of opinions from the Bank of Japan's October
policy meeting showed members were unsure on when to raise
rates, also due to political uncertainty.
The rate outlook will be crucial for the greenback while
all major central banks ease their monetary policy.
Citi expects U.S. rates to stay close to current levels
in the near term as the market is caught between expectations of
significant policy changes in 2025 and the easing cycle driven
by near-term data.
The U.S. bond market is closed for a public holiday on
Monday, though stocks and futures are open.
Bitcoin soared to a record high above $83,000 on Monday on
expectations that crypto-currencies will boom in a favourable
regulatory environment following the election of Trump as U.S.
president and pro-crypto candidates to Congress.
(Reporting by Hannah Lang in New York and Stefano Rebaudo;
Editing by Jamie Freed, Alison Williams, Toby Chopra, Chizu
Nomiyama and Ed Osmond)
((stefano.rebaudo@tr.com))