Written by Stefano Rebaudo and Wayne Cole
(Reuters) – The euro hit a 4-1/2-month low against the U.S. dollar as investors worried that additional U.S. tariffs could hurt the euro zone economy.
The dollar was trading near its post-U.S. presidential election levels against major currencies as markets focused on data and Federal Reserve speakers and awaited clarity on future U.S. policy. Analysts expect President-elect Donald Trump's actions to put upward pressure on inflation and bond yields, but the Fed's scope for easing will be limited. But investors are trading on cues from economic data and the outlook for interest rates before determining what President Trump's policies will actually be.
Market participants weighed in late Friday on the euro's sensitivity to the threat of U.S. import tariff hikes as media reported that President Trump was backing Robert Lighthizer, seen as a trade hawk, to run trade policy. warned that it was obvious.
But Mr. Lighthizer has not been asked by President Trump to return to the agency overseeing trade policy, two people familiar with the matter said.
The currency fell 0.3% to $1.0685, after hitting $1.0679, its lowest since late June.
“The current thesis among dollar bears is that it will take some time for tariffs to be implemented and for the Fed to readjust to accommodative monetary policy,” said Chris Turner, head of foreign exchange strategy at ING. said.
“We disagree and believe this clean election result could boost U.S. consumer and business confidence while weighing on business confidence in other parts of the world,” he added. Ta.
The dollar index rose 0.3% to 105.32. Last week, the index rose more than 1.5% to 105.44, its highest since early July, after the U.S. presidential election results showed Trump won.
The dollar rebounded 0.8% against the yen to 153.82, but was pulled from last week's high of 154.70 due to risks of Japanese intervention. On November 6th, it hit 154.68, the highest since July.
A summary of opinions from the Bank of Japan's October policy meeting revealed that some members were not confident about the timing of the interest rate hike. Japan's parliamentarians will have to decide on Monday whether Prime Minister Shigeru Ishiba will remain in the party's leadership after he lost his parliamentary majority to a coalition government late last month, with political uncertainty weighing on the decision. It's not going to be easy.
With all major central banks easing monetary policy, the outlook for interest rates will be crucial for the dollar in the near term.
The U.S. consumer price index is scheduled to be released on Thursday, and if the core reading exceeds the expected 0.3%, the chances of the Fed easing in December will further decline.
