Dollar Slips Against Emerging-Market Currencies
21 March 2017 - 8:46AM
Dow Jones News
By Ira Iosebashvili
The dollar fell against emerging-market currencies Monday, as
signals of a more-dovish-than-expected monetary policy from the
Federal Reserve sent investors into higher-yielding assets.
The dollar was recently down 0.4% to 18.99 against the Mexican
peso, the lowest level since U.S. elections in November. The U.S.
currency also lost 0.7% against the South African rand to 12.63,
its lowest since August 2015. Other currencies, including the
Korean won, Indian rupee and Brazilian real, made gains against the
dollar.
Driving the gains are expectations that the Fed will raise rates
at a gradual pace. The central bank raised interest rates by a
quarter point last week, but made few changes to its economic
forecasts, suggesting that it hadn't grown more hawkish on monetary
policy despite signs of a firming U.S. economy.
A rate increase in the U.S. would have lessened the
attractiveness of emerging markets.
"We are seeing an embrace of high-yielding assets," said Kit
Juckes, a strategist at Société Générale. "The danger is, some of
these rallies have been in place for a long time."
The Wall Street Journal Dollar Index, which gauges the U.S.
currency against a basket of 16 others, was recently down 0.1% at
90.46.
The dollar was also pressured by investor concerns that changes
to U.S. trade policy could hamper growth.
World leaders struggled to find common ground on trade at the
meeting of the Group of 20 industrial and developing nations over
the weekend, as U.S. Treasury Secretary Steven Mnuchin got finance
officials to drop a disavowal of protectionism from a closely
watched policy statement.
The group's communiqué now ensures the U.S. can still use
sanctions or other policy tools to punish trade partners and thwart
economic policies the White House believes to be unfair.
"There is an idea that protectionism in general is not good for
the U.S. economy or the dollar," said Omer Esiner, chief market
analyst at Commonwealth Foreign Exchange.
Ian Talley contributed to this article
Write to Ira Iosebashvili at ira.iosebashvili@wsj.com
(END) Dow Jones Newswires
March 20, 2017 17:31 ET (21:31 GMT)
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