Dollar Pares Loss as Mnuchin Says Long-Term Strength Is `Good'

  • Greenback had weakened amid lack of hawkish cues from Fed
  • Euro gains late in day on hawkish comment from ECB’s Nowotny

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The dollar pared its earlier loss after U.S. Treasury Secretary Steven Mnuchin repeated his view that the long-term strengthening of the greenback is in the economy’s best interest and reflects confidence in the world’s reserve currency.

The greenback was mixed against its major peers in the absence of fresh catalysts. It was headed for its first weekly drop in three after plunging Wednesday following monetary policy forecasts from the Federal Reserve that were less aggressive than expected. The euro surged in afternoon trading after European Central Bank council member Ewald Nowotny suggested the possibility that the ECB could raise rates before ending bond purchases.

  • EUR was up more than 0.2% after trading little changed for much of the session; it rose to a five-week high at 1.0767 late in day, spurred by Nowotny, who also said the ECB could raise the deposit rate before the prime
  • Bloomberg dollar index was down ~0.2% and earlier touched a six-week low after dropping 1.3% Wednesday; markets now pricing just one and a half Fed hikes in 2017 and two in 2018, discounting the Fed’s dot plot, which remained unchanged at three hikes for both years
  • Losses were pared after Mnuchin said, “there could be issues in the short-term where perhaps the strengthening does create certain issues, but what I am focused on is the long-term aspects of the currency and the importance of it as a stable reserve currency around the world.” He spoke in Berlin at a press briefing with his German counterpart Wolfgang Schaeuble.
  • GBP/USD rose as much as 0.7% to 1.2377 after BOE’s Forbes voted to raise interest rates and others indicated they may not be far behind her; the pound stalled near its 1.2376 55-DMA; offers rest between 1.2400/10, traders said
  • U.S. data showed that jobless claims fell to 241k in the week ended March 11 vs est. 240k
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