US dollar tumbles on talk that Trump could face impeachment charges

The dollar fell by nearly 2 per cent against the yen to its lowest level since April and hit a six-month low against the Swiss franc on Wednesday as talk that US President Donald Trump could face the threat of impeachment boosted safe-haven assets.

The dollar index, which tracks the U.S. currency against six peers and had scaled a 14-year peak of 103.82 on January 3, fell 0.6 per cent to its lowest level since November 9, surrendering all of its “Trump bump” gains.

News emerged on Tuesday that Trump had asked his now-dismissed FBI chief James Comey to end the agency’s investigation into ties between former White House national security adviser Michael Flynn and Russia.

That raised questions about whether Trump tried to interfere with a federal investigation, spurring speculation over the likelihood of an early exit from office for the former businessman.

The dollar fell by as much as 1.95 per cent against the yen, blowing through the 111 yen level to 110.93 yen. The dollar sank 0.75 per cent against the Swiss franc, falling to its lowest since November 9.

Traders have traditionally bought those currencies and sold dollars in times of uncertainty.

“It’s really a dollar story right now,” said Peter Ng, senior FX trader at Silicon Valley Bank in Santa Clara, California. “Obviously it centres around the drama that’s going on in the White House that’s captivating audiences globally and you can see it’s causing a risk-off sentiment to the market.”

While Wednesday’s price action showed the market is losing faith in Trump’s ability to push through his campaign trail promises of tax reform and fiscal stimulus, analysts said there was limited expectation he would realistically face impeachment.

Fed fund futures showed the market is pricing in a 69 per cent chance the Federal Reserve raises US overnight interest rates at its meeting next month, mitigating losses.

“If the Fed raises interest rates by 25 basis points in June that can and should only make the dollar stronger,” said Kevin D. Mahn, chief investment officer at Hennion and Walsh Asset Management. “You’re seeing downward pressure on the dollar because of what’s coming out of Washington but that’s being offset somewhat by the likelihood of a June rate hike.”

The euro hit US$1.1155, its highest level since November 9. It fell 1.3 per cent against the yen as investors locked in gains after the euro reached a 13-month high of 125.815 on Tuesday.