Dollar Drops as Trump’s Orders Rattle Markets; Pound Also Falls

  • Uncertainty over policy outlook derails budding dollar rally
  • Yen, Swiss franc gain on haven flows amid global stock drop

BNP's Sneyd: Dollar to Remain Strong Despite Tensions

The dollar fell to its low of the session, reverting to a defensive tone amid concern about protectionism in the U.S. after President Trump’s executive order Friday that clamped down on immigration and after earlier threats of border tariffs.

The dollar dropped as stocks in the U.S. fell ~1%, tracking a global equity sell-off, while most Treasury yields also declined.

Trump’s actions increase uncertainty about the U.S. business outlook as the Fed readies for a two-day policy meeting, leaving the dollar’s path in limbo, traders said. Trading flows were muted in the session with some markets still closed for the Lunar New Year holidays, said traders in London, Europe and Toronto who asked not to be identified because they are not authorized to speak publicly.

  • The Bloomberg dollar index is trading down ~0.3%, with the USD lower vs most of its G-10 peers, gaining only vs GBP while holding little changed vs the euro and the Danish krone; today’s declines reverse a USD rally that began late last week as traders shifted focus to divergent monetary policy paths of the U.S. and other major economies
  • GBP/USD is -0.6% at 1.2484 after dropping as low as 1.2468 as traders probed for stop-loss sell orders which are positioned below 1.2460
  • USD/JPY is trading ~113.66 after reaching a fresh low of 113.45 as the S&P 500 fell ~1% and as bids below 113.50 were filled; the yen, along with the Swiss franc, gained on some haven flows, trader in London said
  • EUR/USD trading near 1.0700 and likely trapped intraday shorts after dropping to 1.0620 as German inflation rose less than expected; early drop saw stop-loss sell orders and stop-entries tripped under 1.0650, traders in Europe said
  • USD/CHF trading near a fresh low 0.9934, saw earlier selling by a pair of hedge funds as it retreated from its session high ~1.0045, traders in London and Europe said
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