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Dollar drifts south as market waits to hear from Trump – Market Watch

HomeNewsDollar drifts south as market waits to hear from Trump – Market Watch
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Dollar drifts south as market waits to hear from Trump – Market Watch
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The dollar trended south Tuesday, though many investors were sitting on the sidelines ahead of U.S. President Donald Trump’s address to a joint session of Congress later.

The greenback USDJPY, -0.32%   fell to ¥112.46, compared with ¥112.74 late Monday in New York. The euro EURUSD, +0.0945%  was trading at $1.0595, slightly up from $1.0587 late Monday.

The WSJ Dollar Index BUXX, -0.14%  , a measure of the U.S. dollar against a basket of major currencies, was down 0.10% at 90.89.

The greenback was struggling to hold onto overnight gains triggered by renewed expectation for a Federal Reserve interest-rate increase next month. Federal Reserve Bank of Dallas President Robert Kaplan, who votes on interest rate decisions this year, said he feels it is better to raise those rates “sooner rather than later.”

But the U.S. currency lacked clear direction, as investors were largely taking a wait-and-see stance ahead of Trump’s prime-time speech in the U.S.

“We’ve seen short covering since yesterday,” given the Fed officials remarks and expectations that Trump will likely give neither positive or negative surprise to the market, said Marito Ueda, director at FX Prime byGMO.

“But I think investors have found it difficult to take positions right now. There is no need to make a wager,” said Ueda, adding that many expect it’s better to wait longer to buy the dollar until details about fiscal stimulus and tax plans come out at a later date.

Nomura Securities chief FX strategist Yunosuke Ikeda said it would be reasonable to assume a lack of direct economic and fiscal implications from Trump’s speech.

But a renewed increase in expectations for stimulus potentially emerging from it — and a resultant gain in U.S. Treasury yields —could make it easier for the dollar to get back to ¥114.

Ikeda said Trump may use rhetoric similar to a “historic increase” in defense spending, so investors need to stay cautious if yields start going up ahead of the upcoming March 15 Federal Open Market Committee.

In other currency trade, the euro EURJPY, -0.22%  fell moderately to ¥119.14 midday from ¥119.32 late Monday.

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