Dollar Drops to Lowest Since November as Trump Rattles Markets

  • Leveraged names unwinding stale USD longs; month-end weighs
  • USD halves post-election gain as reflation trade sputters

Tom Barrack: U.S. Dollar Will Continue to Get Stronger

The greenback fell to a fresh low for the session, extending losses against all of its G-10 peers as the Bloomberg dollar index dropped to its lowest since mid-November, with the drop accelerating as President Trump claimed other countries devalue their currencies.

The decline may have been exacerbated by month-end flows from portfolio rebalancing. The dollar was further undermined by a drop in the Treasury 10-yr yield, which fell to a fresh low for the day near 2.43%.

Foreign exchange flows were initially from fast money accounts adding to dollar shorts that have been rebuilt since the weekend, a trader in London said. Selling was later seen from leveraged accounts unwinding stale longs, though not yet going short, another trader said.

The dollar slide began earlier in the day after Trump adviser Peter Navarro said the euro was “grossly undervalued.” Those remarks came after the Trump immigration order and the border wall spat with Mexico heightened U.S. businesses uncertainty, bolstering the view that the “Trump reflation trade” in FX seems to be running out of steam, traders have said.

The dollar has dropped almost 3% since the start of January after gaining as much as 7.1% post-election.

Real money players who were expected to build USD long positions in anticipation of a fiscal boost to the economy are still holding fire, said traders who asked not to be identified because not authorized to speak publicly.

  • EUR/USD trading at 1.0797, near a fresh high at 1.0801 after absorbing offers above 1.0770 before further supply above 1.0800 capped the move, traders in Europe and London said
  • Euro also faces tech resistance at 1.0802 from the 100-DMA, breach may allow gains as far as the 200-DMA near 1.1000
  • USD/JPY trading at 112.35 after dropping to 112.08 new low in recent trading after strong bids below tech support at 112.50 were filled
  • Further bids are positioned ahead of 112.00 and tech support sits at 112.06 from the Nov. 30 low
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