April 24, 2017

Euro propped up by weak dollar, sterling near 6-month high

21 April 2017, 12:34 | Melvin Schneider

Asia stocks slip amid North Korea concerns, dollar up on Mnuchin comments

Light is cast on U.S. one-hundred dollar bill next to Japanese 10,000 yen note

MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.9 percent lower, while Japan's Nikkei rose 0.35 percent.

USA housing starts and building permits for March, as well as industrial production, are also due later in the session. Meanwhile, the Chinese market plunged for four consecutive sessions due to tighter regulations.

The dollar fell sharply against a basket of major currencies on Tuesday weighed by geopolitical events while sterling rose to a two-and-half month high, after UK Prime Minister Theresa May announced plans to call an early election.

The FTSE 100 fell 0.1 percent to 7,142.30 while France's CAC 40 rose 0.2 percent to 4,999.18 and Germany's DAX gained 0.2 percent to 12,025.24.

"We still think the dollar is going to strengthen over time based on the outlook for USA monetary policy... but for now, with markets not heavily focused on monetary policy, it could explain this consolidation" for the greenback, said Eric Viloria, currency strategist at Wells Fargo.

The dollar edged up 0.1 percent to 108.58 yen, while the euro edged down slightly to $1.0719 after riding sterling's coat-tails to three-week highs overnight. The pound was trading at $1.2825, down from $1.2840 but still higher than the pre-announcement level.

The dollar index, which measures the greenback against a basket of six other major currencies, hit a three-week low on Tuesday as 10-year treasury yields fell below 2.2% to their weakest levels since the United States election results, and remained close to that level on Wednesday. It also cleared the 200-day moving average for the first time since June, putting the squeeze on a raft of speculative short positions.

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The euro was flat on the day at $1.07140 EUR= , and was expected to tread water ahead of this weekend's vote.

Oil prices were weighed by concerns that US production growth is undermining efforts to cut oversupply after a USA government report said shale oil output in May was expected to post the biggest monthly increase in more than two years.

Against the yen, the dollar was up 0.4 per cent at 108.80 having been as low as 108.39 earlier.

A run of disappointing USA economic data and doubts that the Trump administration will progress with tax cuts have quelled expectations of faster inflation and boosted fixed-income debt. US gold futures GCcv1 fell 0.05 percent to $1,291.30 an ounce.

Weak U.S. economic data also pushed down U.S. Treasury yields and weighed on the dollar.

In commodity markets, profit taking nudged gold down 0.4 percent to $1,287.10 an ounce, and away from Monday's peak of $1,295.42.

USA crude CLc1 added 0.1 percent to $52.69 a barrel, after falling 1 percent on Monday, its biggest decline in nearly a month.

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