CURRENCIES: Dollar Turns Higher As Consumer-confidence Reading Boosts Stocks
March 28 2017 - 1:39PM
Dow Jones News
By Joseph Adinolfi, MarketWatch , Rachel Koning Beals
Investors look to remarks from Yellen and bevy of Fed
officials
The dollar strengthened against its main rivals on Tuesday after
consumer confidence in March soared to its highest level in more
than 16 years, sending Treasury yields and stocks higher.
The Conference Board said its consumer confidence index leapt to
125.6 in March from 116.1 in February, surpassing economists'
expectations for a 114.1, according to a survey conducted by
MarketWatch
(http://www.marketwatch.com/story/consumer-confidence-soars-in-march-to-best-reading-in-16-years-2017-03-28).
The data helped allay fears about sluggish economic growth in
the first quarter, suggesting that the apparent weakness in
consumer spending during the first quarter will prove short-lived,
according to Capital Economics. The Atlanta Fed's GDPNow tracker is
presently projecting gross domestic product growth of just 1%
during the first quarter.
The euro fell to $1.0837 in recent trade, compared with $1.0864
late Monday, while the dollar climbed to Yen110.72, compared with
Yen110.66 late Tuesday.
Earlier, the dollar had weakened as investors questioned whether
President Donald Trump would be able to garner enough support among
fractious congressional Republicans to pass tax cuts and
infrastructure spending.
The dollar shot higher after Trump's upset victory in the Nov. 8
U.S. election, thanks in part to the perception that his promised
fiscal-stimulus measures would bolster growth and inflation,
allowing the Federal Reserve to raise interest rates more
quickly.
But the greenback has erased some of those gains since the
beginning of the year as investors bet that the market was too
quick to price in the potential economic impact of Trump's
policies. Typically, higher interest rates, or the expectation that
rates will rise, will cause a currency to strengthen by increasing
the return on assets denominated in it.
Last week, House Republicans withdrew a plan to repeal and
replace Obamacare amid opposition from conservatives and some
centrists within their own party, shaking investor confidence in
Trump's ability to gain passage of other parts of his agenda.
"The market is still wondering if, given the concerns about the
deficit and debt, Trump will be able to get support for a
significant amount of fiscal stimulus," said Jane Foley, senior
currency strategist at Rabobank.
The ICE Dollar Index , which gauges the dollar's strength
against a basket of six rival currencies, rose 0.3% to 99.46. U.S.
stocks turned higher, too, with the Dow Jones Industrial Average on
track to snap an eight-day losing streak.
Investors heard from Chairwoman Janet Yellen, Kansas City Fed
President Esther George, and Dallas Fed President Rob Kaplan, but
their remarks appeared to have little impact on the dollar.
Now, they're turning their attention to Fed Vice Chairman
Stanley Fischer, who is set to appear on CNBC between 1:30 and 2
p.m. Eastern.
Fed Gov. Jerome Powell will also deliver public remarks at 4:30
p.m. Eastern.
The Fed raised interest rates two weeks ago and is expected to
hike rates at least two more times, according to the central bank's
projections. However, the dollar sold off following the decision as
investors were disappointed by the Fed's reluctance to signal a
faster pace of rate increases.
The Fed funds futures market are currently pricing in two more
rate increases by December and higher interest rates are usually
supportive of the dollar.
The British pound drifted lower against the dollar as investors
braced for the U.K. government to officially invoke Article 50, a
decision that's expected Wednesday. The move would formally begin
negotiations between the U.K. and European Union over the terms of
the former's exit from the trading bloc. The pound traded at
$1.2481, compared with $1.2559 late Monday.
In other currency trading, the South African rand sank after
Bloomberg News reported that President Jacob Zuma told several of
his political allies that he's considering firing popular Finance
Minister Pravin Gordhan. The currency also weakened sharply against
the dollar on Monday following reports Zuma had ordered Gordhan to
return home from an international investor roadshow. The rand
traded at 12.96 to the dollar on Tuesday, compared with 12.74 late
Monday in New York.
Read:South Africa's currency, stocks plunge as finance minister
clashes with president
(http://www.marketwatch.com/story/south-africas-currency-stocks-plunge-as-finance-minister-clashes-with-president-2017-03-27)
(END) Dow Jones Newswires
March 28, 2017 13:24 ET (17:24 GMT)
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