New lows were reached on Wednesday for the U.S. dollar following the remark by U.S. Treasury Secretary Steven Mnuchin that he welcomed its weakness and figures indicated that the euro zone economy began this year at its strongest pace in over ten years.
The greenback was down half a percent against a basket of currencies in European trade. The euro hit a three-year high of $1.2356, the dollar dropped below 110.00 yen for the first time since September and reached fresh three-year lows on a trade-weighted basis.
U.S. President Donald Trump is scheduled to speak on Friday at the World Economic Forum in Switzerland, and investors have concerns that his speech will be used to indicate a more isolative policy stance.
“It looks as if U.S. politics are indeed affecting the currency market, especially as they start to affect trade policy,” said Marshall Gittler, chief strategist, regarding the new import tariffs on washing machines and solar panels as an example.
Other economies continued to boom around the globe.
Japan’s exports to China and Asia reached record levels as shipments increased in December for the 13th straight month and manufacturing growth reached a four-year high in January.
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The rise in the euro comes before Thursday’s European Central Bank meeting, where the central bank may revise its policy guidance early this year. The euro zone’s economy outperformed the U.S. economy last year and is showing increased indications of strength this year.
On Wednesday, most emerging market currencies gained, with the yuan and South Africa’s rand both hitting a more than two-year high while the dollar endured its weakest run in nearly eight years.
MSCI’s world equity index, which tracks shares in 47 countries, touched fresh highs Tuesday, but Wednesday it was a bit different.
Overnight, Wall Street climbed to new highs because of U.S. President Donald Trump’s tax cuts, which will see J.P. Morgan apply a $20 billion investment plan. Stock futures signaled towards s higher open on Wednesday, up 0.18 percent in European trade.
But MSCI’s broadest index of Asia-Pacific shares outside Japan, fell 0.2 percent, follow Tuesdays jump to an all-time high.
European shares were diverse as well, with a decline in utility stocks and falling tech stocks.
The British pound moved above $1.41, its highest since June 2016, helped by the weak dollar and the optimism surrounding Britain’s chances of obtaining a favorable Brexit deal.