The dollar dropped against the euro as comments by US President Donald Trump risked ratcheting up trade war tensions, while stocks diverged.
Artjom Hatsaturjants, research analyst at Accendo Markets, said “market sentiment soured on President Trump criticising the Fed for hiking rates and threatening to go ‘whole hog’ on imposing tariffs on all $500 billion of Chinese imports to the US, further inflaming global trade tensions and putting at risk central bank independence”.
In an interview with CNBC television broadcast Friday, Trump threatened to slap all Chinese imported goods with tariffs, risking an escalation in global trade war tactics.
“I’m ready to go 500,” the Republican leader told CNBC, referring to the $505.5 billion in Chinese imports into the United States in 2017. “I’m not doing this for politics, I’m doing this to do the right thing for our country.”
“We’ve been ripped off by China for a long time,” he added.
CNBC began broadcasting parts of the Trump interview Thursday, revealing also that he had broken with the presential practice of not commenting on the Federal Reserve’s interest-rate decisions.
“Currency is now part of the trade war folks,” said Greg McKenna, chief market strategist at AxiTrader.
“And it is worth pondering whether this is a president who is going to break with 25-30 years of tradition in not interfering in Fed policy deliberations going forward.
“What I saw in that brief excerpt is a president who is going to drive his trade and tariff policy forward regardless of outside objections,” McKenna added.
The dollar began taking a hit on Thursday after Trump suggested that the Fed’s policy of raising US interest rates was pushing up the dollar, in turn hurting American exporters.
His comments did not help to push the dollar down considerably versus the yuan, however. It slipped Friday against the Chinese currency and was expected to extend its steady decline, providing Beijing with a buffer against punitive US trade tariffs.
In excerpts of an interview with US television network CNBC aired Thursday, Trump said a strong dollar “puts us at a disadvantage”, adding that the Chinese yuan “has been dropping like a rock”.
Those comments, plus Trump’s criticism of Federal Reserve interest rate hikes, caused the dollar to fall back against other currencies, however, including the pound which rebounded from 10-month lows versus the greenback.
Fears are growing over a fierce global trade war, after Trump’s imposition of hefty import taxes on steel and aluminium from the EU, Canada, and Mexico, in addition to levies already on goods from China worth tens of billions of dollars that have sparked retaliatory tariffs.
Key figures
(As of 11:15 GMT)
London – FTSE 100: DOWN 0.3 percent at 7,664.60 points
Frankfurt – DAX 30: DOWN 0.5 percent at 12,626.71
Paris – CAC 40: DOWN 0.6 percent at 5,384.93
EURO STOXX 50: DOWN 0.4 percent at 3,459.47
Tokyo – Nikkei 225: DOWN 0.3 percent at 22,697.88 (close)
Hong Kong – Hang Seng: UP 0.8 percent at 28,224.48 (close)
Shanghai – Composite: UP 2.0 at 2,829.27 (close)
New York – Dow: DOWN 0.5 percent at 25,064.50 (close)
Euro/dollar: UP at $1.1651 from $1.1647 at 2100 GMT
Pound/dollar: UP at $1.3040 from $1.3017
Dollar/yen: FLAT at 112.40 yen
Oil – Brent Crude: DOWN 13 cents at $72.45 per barrel
Oil – West Texas Intermediate: UP 12 cents at $69.58 per barrel
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