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Dollar pulls back to six-month lows

● Dollar index near weakest level since November
● Euro above $1.10 and sterling nears $1.30
● Wall Street, London and Frankfurt equity gauges hold near record levels
● Brent crude extends rally above $52 a barrel
● Gold bolstered by softer greenback

The dollar index (DXY) is flirting with its lowest levels since the election of Donald Trump as a range of factors contrive to batter the buck.

The DXY, which tracks the greenback against a basket of its peers, is down 0.3 per cent to 98.60, less than 10 pips above its weakest mark since November 11.

At that time the DXY was surging, on its way to a 14-year high of 103.82 by the start of 2017, as traders took bets that president-elect Trump would help revitalise the US economy and cause the Federal Reserve to tighten monetary policy at a faster pace.

Clearly investors are now less bullish on the global reserve currency.

Domestic US issues are one contributing factor. Recent economic data suggests the world’s biggest economy is emerging from another first quarter soft patch with less vigour than hoped. Meanwhile the ability of president Trump to deliver his mooted growth boosting agenda are seen to be stymied by heightened political animus in Washington.

In contrast, easing political concerns are lifting other major currencies. The euro, which has a 58 per cent weighting in the DXY, is back above $1.10 and near its highest in six months after the recent Dutch and French elections pointed to a stemming of the anti-euro populist tide.

The pound is close to $1.30 as investors hope the upcoming UK election may help deliver a softer Brexit, and the South Korean won has strengthened 1.9 per cent against the greenback since the election of president Moon Jae-in last week

Finally, a recent rebound in oil prices has lifted the so-called commodity currencies like the Canadian and Australian dollars, and the Mexican peso in recent sessions.

Emerging market currencies that are also sensitive to resources prices have received a further boost from expectations that the Fed may be able to take a more cautious approach to raising interest rates.

Equities
Wall Street hit another record high on Monday, with the S&P 500 closing above 2,400 for the first time as investors remained confident about corporate earnings.

But S&P futures suggest the benchmark will dip 3 points to 2,399 when trading gets under way for Tuesday, and this is taking some of the steam out of other bourses.

London’s FTSE 100 and Frankfurt’s Dax, which also closed at fresh peaks at the start of the week, are up 0.1 per cent and down 0.1 per cent, respectively.

In Tokyo the Topix rose 0.3 per cent and the Nikkei 225 average added 0.3 per cent to 19,919.8 points, within sight of the 20,000-point mark for the first time since December 2015.

In Sydney, the S&P/ASX 200 was up 0.2 per cent with strength for industrials offset by a drop in for financials.

Hong Kong’s benchmark Hang Seng index was off 0.2 per cent, but on the Chinese mainland the Shanghai Composite added 0.5 per cent after an injection of cash into the financial system by the central bank eased liquidity concerns.

Commodities
A rally in crude oil prices is rolling on, pushing both major markers higher after Russia and Saudi Arabia this week backed the extension of oil output cuts.

Brent crude, the global benchmark, is up 0.4 per cent at $52.01 a barrel, bringing it 2.3 per cent higher for the week.

West Texas Intermediate, the main US contract, is up 0.5 per cent at $49.10 a barrel. It has gained 2.6 per cent since Friday’s close.

Gold is revelling in the weaker dollar, up 0.4 per cent to $1,235 an ounce.