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FOREX-Dollar pressured by US political turmoil, strong eurozone data

Published 17/05/2017, 10:46 am
© Reuters. FOREX-Dollar pressured by US political turmoil, strong eurozone data
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* Perceived safe-haven yen rises to one-week highs

* Downbeat U.S. housing data offsets strong manufacturing report

* Dollar index surrenders all of its 'Trump bump'

TOKYO, May 17 (Reuters) - The dollar nursed its losses on Wednesday after taking a combination of punches - solid eurozone economic data, a fall in U.S. yields on heightened turmoil in Washington and downbeat housing data that reduced expectations of a Federal Reserve rate hike next month.

The dollar index, which scaled a 14-year peak of 103.82 .DXY on Jan. 3 on hopes for tax reform and stimulus measures from the administration of U.S. President Donald Trump, gave back all of its "Trump bump" and wallowed near its lowest levels since Nov. 9.

The index, which tracks the U.S. currency against a basket of six major rivals, last stood at 98.077, down slightly on the day.

Further pressure on the dollar followed news Trump asked his now-dismissed FBI Director James Comey to end the agency's investigation into ties between former White House national security adviser Michael Flynn and Russia, according to a source who has seen a memo written by Comey.

The memo raises questions about whether Trump tried to interfere with a federal investigation. need to see if he can carry out all of his original ideas, compromise, and get organised," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

"There are still Japanese institutional investors who want to buy the dollar on dips, but for now, they're standing back to see what happens next, " he added.

The dollar skidded 0.5 percent to one-week lows against its perceived safe-haven Japanese counterpart and last stood at 112.56 yen JPY= .

U.S. Treasury yields fell after data showing U.S. homebuilding unexpectedly dropped last month, adding to a recent spate of mixed data that has raised doubts about the U.S. monetary policy outlook. Separate data showed U.S. manufacturing production recorded its biggest increase in more than three years in April. yield on benchmark 10-year notes US10YT=RR fell to 2.295 percent in early Asian trade, down from its U.S. close on Tuesday of 2.327 percent.

Interest rate futures showed the market was still in pricing in a nearly three in four chance that the Fed will implement a June hike, but that was down from over 80 percent a week ago, according to the CME Group's (NASDAQ:CME) FedWatch Tool.

The euro added 0.1 percent to $1.10965 EUR= after earlier touching $1.1098, its highest since November.

Data on Tuesday showed the euro zone growing at 1.7 percent year-on-year in the first quarter, in line with expectations.

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