LONDON (Reuters) – The dollar weakened on Tuesday after US President Donald Trump criticized the head of the Federal Reserve for raising interest rates.
FILE PHOTO: US dollar and Japan Yen notes can be seen in this illustration photo of June 22, 2017. REUTERS / Thomas White / file photo
Trump told Reuters in an interview on Monday that he was "not happy" with the interest rate hikes of Jerome Powell and said the US central bank should do more to help him boost the economy.
US presidents rarely criticize the Fed, whose independence is considered important for economic stability. But Trump has made the reduction of US trade deficits a priority, and the combination of rising interest rates and a rebounding dollar brings risks for export growth.
"It seems that Mr. Trump wants to keep the US dollar on the weak side to remain competitive," said David Madden, chief market man of CMC Markets.
"But given the recent dollar demand for geopolitical issues and the Fed's monetary tightening policy, he might find it difficult to talk down the dollar."
The dollar index .DXY against a basket of six other currencies decreased by 0.4 percent to 95,544 from 1050 GMT after touching 95,440, the lowest since August 9th.
Increasing trade strains between the United States and its trading partners, as well as a dip in the Turkish lira, have recently pushed the dollar index up.
But the dollar weakened on Tuesday when investors lost it as a safe haven before China and the United States were holding talks this week that could ease their trade dispute.
Trading tensions generally helped the dollar, which benefits from geopolitical unrest while the market is looking for less risky investments.
"It looks like Trump's comments have taken the market a very long time after the emerging market routine of last week," said Chris Turner, head of the foreign exchange strategy at ING in London.
It is unlikely that the dollar will be knocked from its perch as one of the strongest performing big currencies this year, Turner said.
"As long as (Trump) attacks the Fed verbally rather than actively trying to influence its monetary policy, this should not have far-reaching effects on USD exchange rates," he added.
The Fed has raised interest rates twice this year and is expected to do so again next month.
Traders are preparing to release the Federal Reserve policy minutes on Wednesday and an annual Jackson Hole symposium for insight into the direction of US monetary policy.
Against the US currency the euro strengthened EUR = 0.4 percent to a daily highest price of $ 1.1544.
Ensures that a currency crisis in Turkey would damage banks in the euro zone and the uncertainty about the planned budget of the Italian government has recently weighed on the euro.
Trump's comments seemed to increase investor appetite for the Swiss franc, which is generally considered a safe haven.
The franc CHF = rose by 0.4 percent at 0.9872 francs, a peak of three weeks.
The Australian dollar AUD = was 0.3 percent higher at $ 0.7363 after Prime Minister Malcolm Turnbull survived a leading vote with a small margin.
Edited by Larry King and Gareth Jones