Dollar/yen off 5-month low but US-Japan trade issues limit rise

Posted April 20, 2017

USA stocks rose after three straight sessions of losses as investors shifted their focus to earnings and the greenback steadied after Treasury Secretary Steven Mnuchin said dollar strength is good over long periods of time. This was probably because of the tension mounting from the North Korea front, the upcoming French presidential elections and also due to the economic dialogue that is to take place between the United States and Japan on Tuesday.

U.S. President Donald Trump is "absolutely not" trying to talk down the strength of the dollar, Treasury Secretary Steven Mnuchin was quoted as saying in the Financial Times on Wednesday.

Mnuchin also acknowledged that one of the key elements in a tax overhaul plan being developed in the House of Representatives, a border-adjustable tax on imports that would give preferential treatment to exporters and to retailers and manufacturers who source goods and raw materials within the U.S., is facing resistance from within the administration.

Mnuchin told the Financial Times that while he agrees with the President's views that the strong domestic currency is hurting exports he believes that this is a short-term phenomenon.

With the first round of France's presidential election just four days away and polls showing just a few points between the top four candidates, analysts said any gains in the euro would be capped, and the single currency was only marginally higher on the day at $1.0837.

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The US dollar had an Easter Monday slump, mostly against the yen on geopolitical worries.

Shares dipped on Monday while the dollar and USA bond yields fell after soft US economic data hurt investor sentiment already frayed by worries over North Korea and upcoming French elections. "The yen can not simply continue weakening along with higher stocks under such conditions". "We have of course seen Trump suggest the main movements against (North) Korea are likely to be economic sanctions rather than military", Foley said.

"But at the same time, for the sake of his supporters, Trump has to stick with his pledge to tackle trade imbalances, and this raises the risk of his administration getting tough with Japan", Noji said.

Weaker prices for iron ore continued to weigh on the Australian dollar, which fell 0.6 percent to $0.7539 after rising to a two-week high on Monday above $0.7600 on upbeat Chinese growth data. The low reached 2.1966% today.