Wednesday, December 4, 2024

Dollar Heads for Worst Week Since August as Trump Trade Stalls

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(Bloomberg) — The dollar is heading for its biggest weekly loss in three months as investors start to rethink the so-called Trump trade that has driven gains in the currency since the US election.

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Bloomberg’s gauge of the US currency slipped 0.2% Friday, extending this week’s decline to 1.1%. The greenback has dropped against all except one of its Group-of-10 peers this week, with its biggest losses versus the yen.

The dollar’s rally has stalled as President-elect Donald Trump’s tariff threats rattled financial markets, and the nomination of Scott Bessent as the next US Treasury secretary pushed down US yields. The currency also retreated after an index of dollar-long positioning climbed to the highest level in over a year, suggesting a retracement may have been overdue.

“I sense it’s not much other than exhaustion after the scale of the run since Trump’s election win,” said Ray Attrill, head of foreign-exchange strategy at National Australia Bank Ltd. in Sydney. “That said, I do think the fall back in Treasury yields from the 4.50% mid-month highs has something to do with it, and is why dollar-yen is at the vanguard of the move down.”

Attrill said there was a view before the Thanksgiving holiday that investors outside the US may be selling dollars as they seek to rebalance their portfolios after this month’s rally in US stocks.

Treasury yields have declined since Trump announced the nomination of Bessent a week ago. Bessent, the head of macro hedge fund Key Square Group, is seen by the market as eager to rein in government spending.

Bloomberg’s dollar index has still gained more than 5% this year, and had rallied for eight consecutive weeks before topping out last Friday.

“The market is still trying to find the narrative for the US dollar,” said Mingze Wu, currency trader at StoneX Financial in Singapore. “We expect sideways volatility now before Trump’s inauguration in January, where we will then have a clearer US-dollar direction once he announces his policies.”

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