US dollar slides as Irma bears down and Korea threat lingers

The greenback has continued its decline, falling to a fresh 33-month low as global stocks edged lower.

A strong U.S. dollar and easier financing at home have combined to make U.S. dollar debt less attractive to Asian firms. PHOTO: XAUME OLLEROS/BLOOMBERG NEWS

The dollar continued to slide Friday, while global stocks mostly edged lower, amid ongoing jitters over geopolitical risks and extreme weather in the US.

In stock markets, the Stoxx Europe 600 moved 0.2 per cent lower in the early minutes of trading, led by losses in mining stocks. Futures pointed to a small opening loss for the Dow Jones Industrial Average and the S&P 500 after Wall Street closed slightly lower on Thursday. Most Asian markets notched modest declines.

But the dollar remained the primary focus for investors Friday as the ICE Dollar Index sank to a fresh 33-month low, declining 0.5 per cent.

A variety of factors have pushed the dollar lower in recent months. Fading expectations for the swift passage of growth-boosting measures in Washington, such as tax cuts or infrastructure spending, sparked dollar weakness earlier in the summer. More recently, rising geopolitical worries over North Korea missile tests have pushed investors to buy haven currencies, such as the yen. North Korea is gearing up for Saturday’s Foundation Day holiday — the occasion of a nuclear test last year.

President Donald Trump refused to rule out military action against North Korea on Thursday, stating that a military confrontation is “something that certainly could happen.” The dollar slid 0.7 per cent against the yen Friday and 0.6 per cent against the Swiss franc, another haven currency. Prices of gold, another typical haven asset, rose 0.7 per cent to $US1,359.60 an ounce.

Meanwhile, the euro has appreciated strongly against the dollar in recent months amid signs of a robust economy recovery in the eurozone. The bullish sentiment was reinforced by the European Central Bank boosting its growth forecast on Thursday, which sent the euro up by nearly 1 per cent on Thursday and a further 0.2 per cent on Friday to $US1.2050.

Closer to home, some investors are concerned Hurricanes Harvey and Irma could hurt some economic indicators in the near term, which could damp expectations the Federal Reserve will raise interest rates later this year. Higher interest rates tend to boost a currency.

“In the U.S. we have had a downgrade of the expectations for a rise in interest rates for this year and next year,” said Azad Zangana, senior European economist at Schroders. “That has helped weakening the dollar in general.”

Stocks markets were mixed in the Asia-Pacific region.

South Korea’s Kospi fell 0.1 per cent and Japan’s Nikkei Stock Average edged down 0.6 per cent. Japanese electronics companies were hurt by the strong yen, which hit a 10-month high against the dollar overnight. Insurers, meanwhile, were under pressure from sinking U.S. Treasury yields — the benchmark hit 2017 lows overnight. Yields had risen Thursday after the European Central Bank postponed releasing a timetable for phasing out its bond-buying efforts.

The yield on the 10-year U.S. Treasury note continued to decline on Friday to 2.027 per cent from 2.061 per cent on Thursday, according to Tradeweb, amid demand for haven assets.

Wider worries about global interest rates remaining low also pressed Australia’s stock benchmark, in which the country’s big banks make up some one-quarter of the total weighting. The S&P/ASX 200 fell 0.3 per cent as the banks suffered roughly 1 per cent drops.

But some other Asian markets recorded gains, with Hong Kong’s Hang Seng index rising 0.4 per cent.

In commodities, Brent crude oil rose 0.3 per cent to $US54.66 a barrel.

Dow Jones Newswires