US dollar tumbles as trade war hits US economic data - Taipei Times

The New Taiwan dollar on Friday rose NT$0.027 against the US dollar to close at NT$31.520, trimming losses to a 0.7 percent depreciation against the greenback from NT$31.297 a week earlier.

The greenback opened at NT$31.550, moving between NT$31.498 and NT$31.564 before the close.

Elsewhere on Friday, the US dollar fell from a two-year high against a basket of major currencies after orders for US-made capital goods fell, further evidence that manufacturing and the broader economy are slowing, due in part to a US-China trade dispute.

The weaker-than-expected data, a closely watched indicator for business spending plans, drove the US dollar lower and added to a fall that began on Thursday following a report that showed manufacturing activity this month hit its lowest level in almost a decade.

Taken together, the reports suggested a sharp slowdown in US economic growth is under way, which could affect the US dollar’s safe-haven status.

The US dollar index was down 0.27 percent at 97.587. It was also 0.8 percent off a two-year high of 98.371 hit in the previous session.

Some had analysts initially believed that a trade war would be a boon for the US dollar — because the currency serves as a safe haven in times of uncertainty and because the US was likely to be hurt the least, but that has not proven to be true.

“The IMF suggests that US import tariffs are mainly paid for by US companies, depressing their profit margins. Hence, it should not be surprising to see US capex plans being cut radically, which should soon translate into moderating labor market conditions,” Morgan Stanley global head of foreign exchange strategy Hans Redeker wrote.

China on Friday denounced US Secretary of State Mike Pompeo for fabricating rumors after he said that the chief executive of China’s Huawei Technologies Co Ltd (華為) was lying about his company’s ties to Beijing.

Escalating trade tensions and weak data have fueled rate cut expectations by the US Federal Reserve. Money markets now broadly expect one rate cut by October, followed by another by January next year.

“In the current circumstances, we strongly suspect that further escalation in protectionism will lead the Fed to consider easing policy,” TD Securities head of global macro strategy Michael Hanson wrote. “Increases in inflation should be relatively short-lived, while the hit to growth could be more persistent.”

US dollar weakness also helped boost sterling from a four-and-a-half-month low, although the rally was primarily driven by British Prime Minister Theresa May’s announcement that she would quit after failing to deliver a Brexit deal.

The pound was last up 0.5 percent at US$1.272.

The euro was also stronger, rising 0.24 percent to US$1.121, benefiting from the US dollar’s weakness.

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