Dollar slips against yuan on Trump remarks greenback is too strong

The dollar sank against the offshore Chinese yuan as the greenback fell broadly on Wednesday after US President Donald Trump said the dollar was “getting too strong” and he would prefer that the Federal Reserve keep interest rates low.

The dollar fell 0.25 per cent against the typically little-moving Chinese currency to a six-day low of 6.8822 yuan.

The move lower for the dollar against the yuan was due to overall dollar weakness on the back of Trump’s comments about possibly retaining US Federal Reserve chair Janet Yellen and being opposed to the dollar’s strength, said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

“The comments on China could have been positive (for the yuan) because I felt China was walking on eggshells over this issue and to the extent that when they have intervened over the last year it’s been to sell dollars to keep (the pair) from moving higher,” he said.

“So if the pressure’s gone you think they don’t have to intervene to keep it from moving higher, so then it will go up. But instead we’ve just had this generalised dollar move lower and it’s in every axis pretty much including dollar/China.”

Trump said, during an interview with the Wall Street Journal, that his administration would not label China a currency manipulator, reversing a campaign pledge to do so.

“The market had a big reaction, but I think it was an overreaction,” said Kathy Lien, managing director at BK Asset Management in New York. “He may just be hedging his bets by making sure that the American public realises he’s not backing down on trade.”

The dollar index, which tracks the US currency against six major rivals, fell to its lowest since March 30 after the news.

The dollar fell by more than 1 per cent against the yen on Tuesday, its biggest one-day fall in three months against the Japanese currency. The greenback fell below 110 yen for the first time since mid-November. On Wednesday, it extended those losses, dropping to 108.93 yen, its lowest since November 17.

Against the traditionally safe-haven Swiss franc, the dollar dropped to 1.0021 franc, its lowest in a week. The euro rose 0.6 per cent against the dollar to a 6-day high of US$1.0675.