* Weak stocks pressure dollar by driving down U.S. yields
* Euro edges down from 7-week high vs dollar
* Investors concerned by healthcare vote, FBI investigation
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, March 22 The dollar hit a four-month low
against the safe-haven yen on Wednesday as a risk-off mood took
hold across markets, with investors rethinking the "Trumpflation
trade" that had pushed the greenback to a 14-year peak and
stocks to record highs.
Shares on Wall Street fell by the most since before Donald
Trump's election on Tuesday, as investors worried the U.S.
president would struggle to deliver his promised tax cuts and
The cautious mood continued into Asian and European trading,
with stocks and U.S. Treasury yields sharply lower, eroding the
interest-rate allure of the dollar, which hit a seven-week low
of 99.62 against a basket of major rivals in Asian
trading, before recovering to trade flat by 1200 GMT.
Against the yen, which investors traditionally flock to
during times of risk aversion, the dollar fell as much as 0.6
percent to 111.13 yen, with nervousness deepening ahead
of a key healthcare vote in U.S. Congress on Thursday.
Investors are also worried by an FBI investigation into
possible ties between Trump's presidential campaign and Russia
as Moscow sought to influence the 2016 U.S. election, which was
confirmed on Monday.
"The mood is being driven by this realisation that Trump is
not going to be able to deliver all his promises – perhaps not
even most of them," Societe Generale currency strategist Alvin
Tan, in London, said, citing the healthcare vote and FBI
investigation as key among investors' concerns.
The U.S. currency has also felt pressure from a resurgent
euro in recent days, on growing expectations of a tightening in
European Central Bank monetary policy this year, and on bets
that the anti-euro candidate Marine Le Pen will be defeated in
the French presidential elections.
But the euro slipped back from a seven-week high above $1.08
on Wednesday, trading down 0.2 percent on the day at $1.0787
"What we’ve had in the last few days is a very significant
shift in the view on the euro because of the pricing in of
possible ECB rate hikes quite early...but we need more
confirmation on it for the euro to go further because this is a
story that is still a bit fragile," said Commerzbank's head of
currency research in Frankfurt, Ulrich Leuchtmann.
"We can't be sure that core inflation in the euro zone will
really pick up, therefore we cannot be sure if the ECB will
really be motivated to normalize interest rates soon."
Dollar bulls were disappointed last week when the U.S.
Federal Reserve hiked interest rates as expected but did not
signal a faster pace of future tightening, as many had
anticipated, which was also keeping the greenback under
pressure, analysts said.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by
Tom Heneghan and Susan Thomas)