Dollar climbed to one-week high against yen on Friday, once again buoyed by expectations that U.S. President Donald Trump would deliver on his campaign promise. He is to put policies in place to bolster an economy that has improved but has sputtered at times.
The greenback has climbed for two straight days, pulling it back from seven-week lows against a basket of currencies on the view that 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 there was a “growing conviction that Trump’s campaign promises are likely to be borne out in reality.”
Increasing expectations of tax reforms and fiscal stimulus, which support the dollar, are temporarily easing concerns of trade protectionism, he said.
“The heavily abstracted threat of a trade war is unlikely to shake investor confidence until the reality arrives,” Schamotta said.
Dollar briefly wobbled after advance data showed U.S. economic growth slowed more than expected to 1.9 percent in the fourth quarter due to weak exports. The market was expecting growth of 2.2 percent.
The economy grew only 1.6 percent in 2016, the weakest pace since 2011.
Dennis de Jong, managing director at online currency broker UFX.com in Limassol, Cyprus, described Friday’s U.S. GDP number as “solid but not spectacular growth and should please Janet Yellen and her Fed colleagues.”
The 4 percent fall in the dollar in three weeks from January 3 reflected doubts about how the new administration’s policy mix would play out for the currency, notably after both Trump and Treasury Secretary nominee Steven Mnuchin hinted at concerns over its strength.
But many analysts cast it simply as a necessary adjustment to market positioning before the dollar can deliver on what were widespread expectations of a strong rally in 2017.
In midafternoon trading, the dollar was up 0.5 percent against the yen to 115.11. It rose against sterling, which fell 0.29 percent to $1.255.
The euro, however, gained 0.16 percent against the dollar to $1.0687, leaving the dollar index slightly higher on the day at 100.42.