Dollar weakness eases on Mnuchin comments

Yesterday, the Dollar fell to a five-month low against the Yen after soft US data hurt investor’s sentiment, already frayed by worries over rising tensions in North Korea, and fueling demand for the safe-haven Japanese currency. Data last Friday showed that US retail sales dropped more than expected in March while annual core inflation slowed to 2.0%, the smallest advance since November 2015.

Tensions on the Korean peninsula have escalated as US President Donald Trump took a hard rhetorical line with North Korean leader Kim Jong Un, who has rebuffed admonitions from China and proceeded with missile tests. However, the Dollar was supported by US Treasury Secretary Steven Mnuchin comments saying that he agreed with Donald Trump’s view that the Dollar’s strength in the short term was hurting exports, but that he also saw the currency’s strength over the long term as a positive. Mnuchin’s remarks were seen to have played down views expressed by the president, who noted last week that the Dollar was too strong, sending it reeling.

Meanwhile, the Australian Dollar dropped for the first time in five days against the US Dollar yesterday as well, after the Reserve Bank of Australia (RBA) warned that the domestic labour and housing markets warranted “careful monitoring” over the next months.

The RBA warned that “some indicators of conditions in the labor market have softened recently”, adopting a slightly more downbeat tone than March and previous months where it had described labor market indicators as “mixed”. Moreover, weaker prices of Iron Ore, Australia’s key export, have prevented the currency from staying above $0.7600.