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Dollar firms, sterling falls again on Brexit worries

Dollar firms, sterling falls again on Brexit worries

Mon Mar 11 2019


The index was shy of its recent peak of 97.710 hit last Thursday, its highest since December 14 last year


The dollar edged up early on Monday, hovering close to a near three-month high as investors took cover in the currency amid global growth concerns, while sterling extended its decline on an uncertain outlook over Britain's exit from the European Union (EU).


The dollar index, which measures the greenback against a basket of six major rivals, gained 0.1 per cent to 97.426 in early Asian trading.


The index was shy of its recent peak of 97.710 hit last Thursday, its highest since December 14 last year. It is up 1.3 per cent so far this year.


The euro was a shade lower at $1.1225. The single currency had fallen to its weakest level since late June 2017 on Thursday, hurt by dovish signals from the European Central Bank (ECB).


“After the ECB's big downgrade of the growth outlook for the euro area, together with the weaker-than-expected Chinese export and import data, the worry over the global economy is re-surging again. That's pushing down the euro and other currencies. The United States (US) is not particularly strong, but other areas are weak. That's why the dollar is relatively strong,” ,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.


Data on Friday showed US employment growth almost stalled in February, with the world's top economy creating a measly 20,000 jobs, far fewer than expected by analysts.


But traders found some hope in figures showing the US employment rate slipped back below 4 percent and average hourly earnings accelerated by 0.4 per cent, helping to reduce the greenback's losses during the previous session.


On Monday, the British pound gave up 0.4 per cent to $1.2968 after briefly dipping to a near three-week low on nervousness over Brexit. The currency had already fallen for seven straight sessions.


Sterling has come under renewed pressure after British foreign minister Jeremy Hunt said on Sunday Brexit could be reversed if lawmakers reject the government's exit deal.


His remarks followed a warning from two major eurosceptic factions in parliament that Prime Minister Theresa May was likely to face heavy defeat at a parliamentary vote on Tuesday on whether to approve her EU exit plan.


The British Prime Minister is scrambling - so far unsuccessfully - to secure last-minute changes to an EU exit treaty ahead of the vote, which comes weeks before the United Kingdom (UK) is set to leave the EU on March 29.


Mizuho's Yamamoto said traders are trimming holdings of sterling as rate-hike expectations by the Bank of England are reduced, making the currency increasingly sensitive to near-term events, such as the parliamentary vote.


“These days, the UK inflation data isn't as strong as before,” he said. “The rate-hike expectation after the avoidance of the no-deal Brexit is fading away.”


Against the Japanese yen, the dollar was down 0.2 per cent at 110.99 yen.



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