Dollar hits lowest level against yen since late November
The U.S. dollar fell to its lowest level against the yen since late November as the failure of a Donald Trump-backed measure to repeal Obamacare gave investors another cue for buying the yen and other major currencies.
The dollar USDJPY, -1.05% fell as much as 1.0% against the yen at one point, to trade at ¥110.24, its lowest level against the Japanese currency since Nov. 22. The euroEURUSD, +0.6019% rose to $1.0849, its highest against the dollar since Dec. 8, before pulling back slightly to $1.0843.
The Wall Street Journal Dollar Index BUXX, -0.57% , a measure of the dollar against a basket of 16 currencies, was 0.4% lower at 89.66. The ICE Dollar Index DXY, -0.21% , which measures the currency against a basket of six major rivals, was down 0.3% at 99.28.
“This is the market reacting to Donald Trump’s failure to implement one of his major campaign promises,” said Bart Wakabayashi, Tokyo branch manager for State Street.
The setback for the White House has strengthened uncertainty over the U.S. administration’s ability to push through its agenda, adding further momentum to an unraveling of support for the dollar that has picked up steam since the Federal Reserve’s decision to raise U.S. interest rates without ramping up its expected pace of further increases.
Investors see the failure of the U.S. administration to secure the votes needed to pass the health-care bill as a “harbinger of things to come,” said Mr. Wakabayashi. “They see it as a lot of opposition to his policies. They see general risk on trade and fiscal policy, and a lot of promises we may have to revisit and cross out some of them.”
Foreign-currency investors may now see the dollar falling toward the ¥108.20-level as they take short positions, Wakabayashi.
It will take robust monthly employment figures or hawkish guidance from the Fed to stop the slide, said Masashi Murata, currency strategist at Brown Brothers Harriman in Tokyo. He sees the next level of demarcation around ¥107.9.
The euro also continued to gain against the dollar. There are “no incentives to prompt investors to sell” the euro right now, said Daiwa Securities senior FX strategist Yukio Ishizuki.