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Dollar index at lowest level since Trump’s election

Broad weakness for the dollar has taken the index tracking the world’s reserve currency back to its lowest level since October, as investors’ reassessment of the outlook for global monetary policy leaves it looking vulnerable.

Here are the numbers on the embattled DXY:

  • It’s down 6.2 per cent on the calendar year
  • Since Donald Trump won the White House, it’s down 2.1 per cent
  • This week, it has fallen 1.4 per cent.

Here is the chart:

The landmark comes as investors continue to redraw their outlook for how monetary policy will shape the market. In a dramatic week for guidance from policymakers, both the European Central Bank and the Bank of England have moved towards a more hawkish stance, even if the ECB sought to soften reaction that took the euro to its highest level in a year.

Meanwhile, there is some concern that the US consumer could be showing a loss of nerve, with slower credit growth and retail sales just as the Federal Reserve defines the pace of its rate tightening cycle.

The euro is up 0.3 per cent against the dollar at $1.1404, while the pound is up 0.3 per cent at $1.2968. The yen is steady at ¥112,32. Almost every major Asian currency made gains on the dollar in Asia trade, with South Korea’s won leading the pack with a rise of 0.4 per cent against the dollar to Won1140.23.

China’s renminbi is 0.3 per cent firmer at Rmb6.78 per dollar, on track for a third straight day of gains and bringing it 3 per cent stronger for the week.

Daniel Been, head of FX strategy at ANZ, says:

Policy tides are shifting and the unwind of the US Federal Reserve’s balance sheet, together with a cautious beginning to normalisation in Europe, will represent a key turning point

But dollar bears, be warned:

Market volatility is almost certain to rise towards the back end of 2017 and into 2018; and the dollar will once again find its footing — but for a different reason. Not because of strong growth and exceptional policy divergence but rather because of a rise in risk aversion

Meanwhile, European bourses are higher in opening trade, with financial stocks making gains.

The region-wide Euro Stoxx 600 is up 0.3 per cent, with London’s FTSE 100 up 0.8 per cent and the Xetra Dax 30 up 0.5 per cent.

Financial stocks are setting the pace, with sentiment toward the sector improving after the US Federal Reserve cleared big US banks to pay out almost all their earnings to shareholders this year.

The move, a vote of confidence in capital levels at Wall Street banks, is seen as another step away from the crisis-era pressures faced by the sector not just in the US, but around the world.

Oil prices are on track to rise for a sixth straight day. Brent crude is up 0.4 per cent at $47.51 a barrel, up 4.3 per cent for the week to date. US marker West Texas Intermediate is 0.5 per cent higher at $44.95.