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Abu Dhabi, UAEMonday 17 December 2018

Trump comments sink dollar with euro breaking 1.15

President accused China and Europe of manipulating their currencies and criticised Fed rate rises

Trump has reportedly taken the EU and China to task over currencies. Bloomberg
Trump has reportedly taken the EU and China to task over currencies. Bloomberg

The dollar extended a decline against major peers on comments from US President Donald Trump, and Asian stocks traded mixed after muted gains in US equities.

The greenback accelerated a slide after the euro broke through the key $1.15 level amid thin summer liquidity. It had weakened earlier after a report from Reuters that Mr Trump said China and Europe manipulate their currencies as well as separate remarks lamenting the Federal Reserve’s interest-rate increases. Treasuries gave back some of Monday’s gains ahead of a meeting of central bankers later this week.

Equities ticked lower in Japan, though pared declines as the yen trimmed gains. Stocks fell in Australia and pushed higher in Hong Kong. The Shanghai Composite Index continued Monday’s rebound when state-backed funds were seen buying stocks to stabilise the market. Earlier, US equities pared gains on the Reuters report, though the S&P 500 Index advanced for a third day to close within 15 points of a record.

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Investors remain on tenterhooks as they await the outcome of talks between the world’s biggest economies on trade that have made their way back onto the agenda. Meanwhile, traders will be closely watching this week’s Jackson Hole symposium in the US for clues on monetary policy, and to see whether central bankers can do anything to help bring back stability after the recent bout of emerging market-led volatility.

“Given the little progress made on the US-China negotiations in the past six months, investors’ expectations are still low,” Tai Hui, JP Morgan Asset Management’s global market strategist, said in a note. “Ongoing negotiation is good news, and that’s what the market is riding on at this stage, but a sustainable agreement to end this tension still seems unlikely at this point.”

Elsewhere, the lira was on course for a third day in a row of declines. Turkish markets are closed for most of this week, which may mean low trading volumes and sharper currency swings than usual. Emerging-market stocks and currencies rose.