Published: Sat, April 15, 2017
Economy | By Melissa Porter

US Dollar Drops Seven-Tenths of a Percent

US Dollar Drops Seven-Tenths of a Percent

After meeting with Chinese President Xi Jinping last weekend, Trump said he changed his mind on what was a signature campaign promise: labeling China a currency manipulator - a country that lessens the value of its currency to cheat on trade.

"They're not currency manipulators", he told The Wall Street Journal.

The US dollar index, which measures the greenback against a basket of six other major currencies, was down 0.5 per cent at its lowest since late March. Trump's comment that the US dollar was getting too strong helped push the yen higher, hurting Japanese exporters' shares.

Asian markets were mixed on Thursday after Trump also softened his stance on Beijing, easing concerns of a possible trade war, dealers said.

Huang Songping, spokesman for the General Administration of Customs, responded to Trump's remarks, saying on Thursday that China and the U.S. have set a 100-day conversation process to discuss the bilateral trade issue.

"That'd be all right, too. We're going to see about that".

He also shifted positions on four key issues, including the Export-Import Bank, whether Janet Yellin would remain chair of the Federal Reserve, whether China should be labeled a currency manipulator and the role of North Atlantic Treaty Organisation in the world.

Trump's upbeat assessment of the relations with China contrasted with blunt talk about ties with Russian Federation, a country with which he had repeatedly vowed to start a new partnership. "But that's hurting - that will hurt ultimately", Trump, who has talked the dollar down several times since his election, told the paper.

Meanwhile, adding to dollar weakness was a rise in US Treasury demand leading to lower yields, as investors sought safe havens in a risk averse environment.

"This is a dramatic shift in rhetoric from (Trump)", said IronFX analyst Sakis Paraskevov in Cyprus.

Earlier in the day, China abstained on a UN Security Council resolution that condemned Syrian President Bashar al-Assad instead of joining Russian Federation in vetoing the resolution as it had done in the past.

In the interview, Trump insisted that the U.S. will not allow North Korea to go nuclear. The two countries are trying to work together to keep North Korea from launching missiles.

The yield on USA 10-year Treasury notes recorded its steepest single-week decline since early 2016 due to demand for longer-dated government bonds spurred by worries over potential US military strikes against Syria and North Korea. It is moving closer to developing a nuclear-tipped missile that could threaten the USA mainland. In February, China banned coal imports from North Korea for the rest of the year.

Just months after saying Yellin "should be ashamed of herself" and accusing her of keeping rates "artificially low" for political reasons in a CNBC interview in September, Trump declined to say he would not re-nominate Yellin to her post as chair of the Federal Reserve.

"I do like a low-interest-rate policy, I must be honest with you", Trump said.

Now the president said he does "like" low interest rates and that he has not made a decision on whether he would ask Yellen to stay on when her term expires in early 2018. "While they're not manipulating their currency at the moment because it doesn't suit their economic needs, make no mistake about it, as soon as the tide turns they will".

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