The US dollar hit new three-year lows overnight, gold and oil hit multi-year highs, copper surged and Wall Street wobbled, then settled after US Treasury secretary Steve Mnuchin said a weaker dollar is good for American trade.
Mr Mnuchin’s remarks, delivered at a news conference at the World Economic Forum in Davos, were a break from previous US administrations where Treasury secretaries have supported a strong dollar policy.
The news saw the US dollar index (against six major currencies) fall below 90 to a series of three year lows. The Aussie dollar peaked around 80.83 US cents, a four month high and was trading around 80.75 in early Asian dealings.
If the slide in the greenback continues the Aussie could easily top the 12 month high of 81.35 US cents, which hands the Reserve Bank a big headache.
Commodity prices soared as a result of the slide in the dollar and Mnuchin’s comments
So oil was up for a third session, crunching through $US65 a barrel for US type West Texas crude and Brent rose well past $US70 a barrel. Comex gold was up sharply in regular trading, settling up 1.5% at $US1,356.30 an ounce—the highest finish for a most-active futures contract since Aug. 18, 2016,
It then continued to gain in after hours dealings to be up around $US21 an ounce at $US1,363, a gain of 1.6%, thanks to the slide in the greenback. Silver also rose sharply, adding more than 4% and copper jumped nearly 4% to trade around $US3.23, for a gain of almost 12 cents on the day! That was despite a sell off the day before on rising stocks in London.
Despite alarmist nonsense from some websites, Chinese iron ore index prices did not fall sharply yesterday (Chinese futures did). The Metal Bulletin index price rose 24 US cents to $US74.53 a tonne for 62% ore delivered to northern China.
The dollar index, a measure of the US currency against a basket of six global peers, was down 0.97% per cent at 89.23, trading below the 90 mark for the first time since New Year’s Eve 2014. The currency was also facing its biggest one-day drop since January 12, when it fell 1%.
The buck has weakened 3% on top of the 10% slide in 2017 – all a legacy of Donald Trump’s Presidency and the growing uncertainty associated with it – and despite rate increases from the Fed and the certainty of more this year.
