The US dollar on Friday hovered near a one-month low against a basket of major currencies and posted its biggest weekly drop in five as investors worried that escalating trade tensions could hurt global growth.
The US dollar index, which measures the greenback against a basket of six other major currencies, was down 0.37 percent at 89.48. For the week, it was down 0.8 percent.
China urged the US on Friday to “pull back from the brink” as US President Donald Trump’s plans for tariffs on up to US$60 billion in Chinese goods moved the world’s two largest economies closer to a trade war.
“People seem to be being just a little cautious with so many headlines coming out, and wondering what the next headline could be and how the market is going to react to it,” said Chuck Tomes, senior investment analyst at Manulife Asset Management in Boston.
“Tactically, people are definitely being a little more cautious because of the uncertainties,” he said.
Expectations about shifting policy at global central banks were also injecting an element of uncertainty into currency markets, Tomes said.
Trump’s decision on Thursday to replace H.R. McMaster as US national security adviser with John Bolton, a hawk who has advocated using military force against North Korea and Iran, could also be weighing on sentiment on the margins, Tomes said.
The gap between the three-month US dollar London interbank offered rate and three-month overnight indexed swap rate, a gauge of stress in the US money markets, on Friday climbed to its highest level in nearly nine years, according to Thomson Reuters data.
In Taipei, the New Taiwan dollar on Friday fell against the US dollar, losing NT$0.017 to close at NT$29.170, but it still gained 0.2 against the greenback for the week.
The yen, often viewed as a safe-haven currency in times of market turbulence and economic uncertainty, partly because of the resilience provided by Japan’s current account surplus, rose to a 16-month high against the US dollar.
The greenback was on Friday down 0.34 percent at ￥104.9, down 0.9 percent from last week’s ￥105.9.
“With fears likely to heighten over a trade war negatively impacting global growth, risk aversion could become a dominant market theme moving forward,” Lukman Otunuga, research analyst at futures brokerage FXTM in London, said in a note.
The British pound added 0.4 percent to trade at US$1.4151, bringing weekly gains to 1.49 percent.
The euro rose 0.5 percent against the US dollar for the week.
The Canadian dollar rose against the greenback as oil prices rose and hotter-than-expected domestic inflation data raised the chances of a further Bank of Canada interest rate hike over the coming months.
Additional reporting by staff writer, with CNA
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