HONG KONG: The dollar came under more pressure Friday and Asian markets saw fresh losses after Treasury Secretary Steven Mnuchin lowered US growth expectations and appeared to temper Donald Trump’s belligerence towards China’s currency policy.
While New York’s blue-chip Dow index hit a record tenth successive all-time high, the Trump-fuelled global rally is showing signs of petering out with analysts suggesting the exuberance about hoped-for spending and tax cuts may have been overdone.
That appeared evident after Mnuchin forecast three percent growth by the end of next year, warning that the effect of certain measures would take time. That compared with the four percent Trump promised on the campaign trail.
In an interview with CNBC, Mnuchin also appeared to wind back on his boss’s earlier threats to call China a currency manipulator, easing concerns about a possible trade stand-off between the world’s top two economic powers.
Stephen Innes, senior trader at OANDA, said in a note the comments “have left investors dangling about the US administration currency policy as there appears to be a subtle shift in the Trump administration’s rhetoric”.
The comments overshadowed his promise to push through tax cuts by August, and pursue deregulation on companies and banks.
“One reason the market is reading a great deal into (Mnuchin’s) views is the proximity of the comments to President Trump’s speech before a joint session of Congress next Tuesday,” Innes added.
The dollar tumbled to 112.67 yen in New York and while it made minor inroads Friday, the unit was still well down from the levels around 113.25 yen earlier in Asia Thursday.
It remained wedged below 113 yen Friday, while the pound extended past $1.25 and the euro dallied with $1.06.
High-yielding currencies also pushed ahead, with the Australian dollar up 0.2 percent and South Korean won 0.4 percent higher.
Mexico’s peso surged more than one percent to 19.70 to the dollar, levels not seen since just after Trump’s November 8 election win as the country’s leaders stand up to the new US administration’s threats over trade, a border wall and immigration. The peso is up 10 percent from record lows around 22 touched last month.
A visit to Mexico by Secretary of State Rex Tillerson to meet its leaders also calmed nerves after Trump’s hardline rhetoric on the country.
“Traders and investors are seeing the effect of the Mexican stance in tempering the US administration’s overt aggression and making a determination that the worst fears they held for the peso and the Mexican economy were overblown,’ said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
Asian equity markets extended the previous day’s losses. Tokyo’s Nikkei ended 0.5 percent lower as the stronger yen hurt exporters, while Hong Kong was down 0.6 percent and Sydney 0.8 percent off.
Seoul fell 0.6 percent, Singapore retreated 0.5 percent and Wellington 0.4 percent but Shanghai staged a late rally to end 0.1 percent higher.
“There are those out there thinking, ‘Well, markets have had such a big runup, it’s time to take a bit of money off the table,’” Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, told Bloomberg News.
“It wouldn’t surprise me to see a bit of consolidation or correction, and maybe we’re starting to see signs of that.”
In early European trade London and Paris each fell 0.1 percent while Frankfurt was 0.2 percent off.