SYDNEY: The dollar recouped a little lost ground on Friday amid signs a delayed vote on President Donald Trump’s healthcare bill would go ahead later in the day, though it remained unclear whether it would pass.
Investors regard the vote as test for the Trump presidency that could show whether it can muster the backing needed to push through fiscal measures central to its economic agenda.
Asian share markets and S&P 500 futures edged higher as investors dipped a toe back into risk trades after a week of wild swings in sentiment.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2 per cent, but was still a fraction lower for the week. Australia bounced back from a tough few days to be up 0.9 per cent on the day.
Japan’s Nikkei added 0.9 per cent, encouraged by a slight softening in the yen. A Reuters poll out on Friday also showed confidence among Japanese manufacturers rose for a seventh straight month to a three-year high. Trump will get a second chance to try to close the deal with Republican lawmakers on dismantling Obamacare in a high-stakes vote on a new healthcare bill later in the day.
Adding to the unease was a Reuters report that the Trump administration is preparing new executive orders to re-examine all 14 US free trade agreements, including those in Asia, to aid American companies. After falling sharply mid-week, Wall Street had lapsed into waiting mode on Thursday with the Dow down 0.02 per cent. The S&P 500 lost 0.11 per cent and the Nasdaq 0.07 per cent.
As stocks stalled, bonds rallied. Two-year Treasury yields have fallen 14 basis points in the past week or so to stand at 1.27 per cent.
At the same time, German yields have risen on speculation the European Central Bank might begin the long process of rate normalisation this year. The central bank issued an upbeat outlook on the Euro zone economy overnight.
The net result was a contraction in the dollar’s yield advantage over the euro, which has seen the single currency steady at $1.0773 after scoring a six-week top of $1.0828 earlier this week. The dollar did gain 0.4 per cent on the yen to 111.35, having hit a four-month low of 110.62 the day before. Against a basket of currencies, it was up 0.15 per cent at 99.911 having shed 1.3 per cent in the past two weeks.
“The dollar is likely to struggle as global investors gradually realise that the US, can still produce policy gridlock even with one party holding the White House, Senate and House,” said Sean Callow, a senior currency analyst at Westpac.
“Moreover, the euro is looking more appealing, with the growth gap with the US not as wide as previously thought and the euro having lost some of its political risk premium as European voters edge away from local Trump wannabes.”
In commodity markets, safe-haven spot eased a touch to $1,243.30 an ounce after hitting three-week high of $1,253.12 . Oil prices idled near four-month lows on investor concerns that Opec-led supply cuts were not yet reducing record US crude inventories.
US crude inched up 10 cents to $47.81, while Brent crude added 7 cents to $50.63. — Reuters
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