By Saqib Iqbal Ahmed
NEW YORK (Reuters) – The U.S. dollar rose to a one-week high against the yen on Friday on hopes U.S. President Donald Trump’s pro-growth policies will further bolster the economy, and a key index of global equity markets slipped as investors paused after a recent rally.
U.S. Treasury debt yields slipped as data showing disappointing U.S. economic growth in the fourth quarter spurred buying of U.S. government debt, while oil prices retreated as investors focused on production increases in the United States.
The greenback has climbed for two straight days, pulling it back from seven-week lows against a basket of major currencies, on the view it would gain from a rise in border tariffs, tax reform and future spending.
Karl Schamotta, director of global product & market strategy at Cambridge Global Payments in Toronto, said increasing expectations of tax reforms and fiscal stimulus, which support the dollar, are temporarily soothing concerns about Trump’s stance on trade protectionism.
“The heavily abstracted threat of a trade war is unlikely to shake investor confidence until the reality arrives,” Schamotta said.
The dollar pared some gains after data showed U.S. economic growth slowed more than expected to 1.9 percent in the fourth quarter due to weak exports.
Latin American currencies strengthened after the U.S. GDP data damped expectations of a fast rate-hiking cycle in the coming months.
The Mexican peso, which slumped on Thursday after the White House said Trump wants a 20 percent tax on imports from Mexico to pay for a wall on their shared border, strengthened around 1 percent.
The dollar was up 0.51 percent against the yen to 115.1 and was up 0.2 percent to 100.58 against a basket of six major currencies.
On Wall Street, stocks were slightly lower at the open as investors took a breather following the Dow Jones Industrial Average’s three-day winning streak spurred by pro-growth optimism and rosy corporate earnings.
“The market has had a strong, solid rally and there’s a pause to evaluate and react to the next set of data and other catalysts that could move the market,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.
The Dow Jones Industrial Average fell 12.68 points, or 0.06 percent, to 20,088.23, the S&P 500 lost 2.52 points, or 0.11 percent, to 2,294.16 and the Nasdaq Composite dropped 1.30 points, or 0.02 percent, to 5,653.88.
The weakness on Wall Street weighed on MSCI’s world index, which tracks shares in 46 countries. The index was down 0.12 percent.
European shares eased with UBS dragging bank stocks lower after posting a drop in full-year profit, while Britain’s biggest supermarket Tesco surged after a 3.7 billion-pound takeover of a supplier.
The pan-European STOXX 600 index was down 0.4 percent at 366.04.
In bond markets, U.S. Treasury yields fell as investors reached for U.S. government debt following the disappointing fourth-quarter GDP data.
Benchmark 10-year Treasury yield was down 1 basis point at 2.495 percent, retreating further from a four-week high reached on Thursday.
Oil prices slipped, giving up gains from earlier in the day, as the market shifted its focus towards production increases in the United States and away from efforts by OPEC and other producers to support prices by cutting supplies.
Brent crude was down 1.14 percent at $ 55.6 a barrel, while U.S. crude was down 0.91 percent at $ 53.29.
Gold fell and was on track for its first weekly loss of the year as persistent dollar strength prompted some traders to cash in on this week’s rally to two-month highs. On Friday, spot gold was little changed at $ 1,188.4.
(Additional reporting by Gertrude Chavez-Dreyfuss in New York and Tanya Agrawal in Bengaluru; Editing by Bernadette Baum)
