US dollar slips on risk aversion after FBI chief fired

Source:Reuters-Global Times Published: 2017/5/10 19:38:40

Currency traders flee to safe-haven assets in wake of personnel change

The dollar slid on Wednesday while the perceived safe-haven yen gained after US President Donald Trump abruptly fired FBI Director James Comey in a move that shocked Washington and piqued investors' aversion to risk.

Comey had been leading his agency's investigation into alleged Russian meddling in the 2016 US presidential campaign.

Democrats immediately accused Trump of having political motives.

Any US political uncertainty tends to weigh on the dollar, as a divided Congress could derail Trump's promised tax reform and stimulus steps.

The dollar index, which tracks the greenback against a basket of six major currencies, slipped 0.2 percent to 99.415, moving away from Tuesday's three-week high of 99.688.

"The Comey news is being treated as a risk-off event, and the headlines were sparking the dollar's move down," said Bart Wakabayashi, branch manager for State Street Bank and Trust in Tokyo.

"The 'Trump trade' lifted the dollar after the election, but now we have to see if he can deliver on all of his promises," Wakabayashi said.

Lower US yields also pressured the dollar. The benchmark 10-year US Treasury yield slipped to 2.388 percent in Asian trade, down from Tuesday's US close of 2.407 percent.

It had scaled five-week peaks overnight, as interest rate futures priced in close to a 90 percent chance that the US Federal Reserve will raise interest rates again at its next meeting in June.

The dollar dipped 0.2 percent against its Japanese counterpart to 113.74 yen, below its overnight high of 114.325, which was its highest since March 15, 2017.

Rekindled fears that North Korea could be gearing up for another weapons test also underpinned the Japanese currency.

"In the early morning hours of Asian trade, the yen started to strengthen, and it could have been the reaction of overseas markets to a North Korean diplomat's comments," said Mitsuo Imaizumi, Tokyo-based chief foreign-exchange strategist for Daiwa Securities.

The euro slipped 0.1 percent against the yen to 123.60, moving away from Monday's one-year high of 124.58.

Bank of Japan Governor Haruhiko Kuroda refrained from commenting on the exchange rate during a lower house fiscal and monetary policy committee meeting on Wednesday, but said a weak yen would help raise Japanese prices this fiscal year.

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