August 23, 2019 / 5:04 PM / 2 months ago

FOREX-Dollar tumbles as U.S.-China trade tension intensifies

    * Fed's Powell says Fed to act as appropriate
    * September rate cut fully priced in
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Recasts, adds analyst comment, Trump's remarks on China, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 23 (Reuters) - The U.S. dollar dropped broadly on Friday after President Donald Trump
ordered U.S. companies to start looking for an alternative to China after Beijing imposed more tariffs on
American goods, further escalating tension between the world's two largest economies in a prolonged trade
dispute.
    That triggered mass selling in the dollar, which fell from a three-week high against the euro and to
one-week troughs versus the yen and Swiss franc. Benchmark U.S. 10-year Treasury yields also
fell sharply.
    The dollar, however, strengthened against the Chinese yuan in the offshore market, hitting a two-week
high.
    "Our great American companies are hereby ordered to immediately start looking for an alternative to
China, including bringing your companies HOME and making your products in the USA," Trump wrote on
Twitter.
    His tweet followed China's earlier move on Friday when it announced retaliatory tariffs against about
$75 billion worth of U.S. goods, putting as much as an extra 10% on top of existing rates

    "Clearly when you look at the U.S. yields and the dollar's reaction, there are concerns that these
latest comments from Trump on China will push the U.S. into recession," said Marvin Loh, senior global
markets strategist, at State Street in Boston.
    Trump's comments overshadowed a speech from Federal Reserve Chair Jerome Powell, who did not announce
a major stimulus measure to ease a worsening global economic outlook, but set the stage for further
interest rate cuts.
    Powell said the U.S. economy was in a "favorable place" and the Fed would "act as appropriate" to keep
the current economic expansion on track.
   "I don't really know what the market was thinking would be delivered, but if you're betting on another
two or three cuts, you wouldn't be dissuaded by this speech based on the headlines," said Richard
Franulovich, head of FX strategy at Westpac in New York.
    Trump, however, was enraged by Powell's speech, saying he wasn't sure who was the bigger enemy, the
U.S. central bank chief or Chinese leader Xi Jinping.
    "As usual, the Fed did NOTHING! It is incredible that they can 'speak' without knowing or asking what
I am doing, which will be announced shortly," Trump wrote on Twitter. "We have a very strong dollar and a
very weak Fed. I will work 'brilliantly' with both, and the U.S. will do great."
    In midday trading, the euro rose 0.5% to $1.1134, after earlier touching a three-week low of
$1.1052. An index that tracks the dollar against six major currencies was down 0.4% at 97.772.
    The dollar fell to a one-week low against the yen and was last at 105.46, down 0.9%. It earlier
hit a one-week high of 106.73.
    Against the Chinese yuan, the dollar was up 0.6% at 7.13 yuan, after earlier touching a two-week peak
of 7.1332.
    
    ========================================================
    Currency bid prices at 12:43 PM (1643 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1134        $1.1078     +0.51%         -2.92%      +1.1147     +1.1052
 Dollar/Yen       JPY=        105.4300       106.4200    -0.93%         -4.38%      +106.7300   +105.3000
 Euro/Yen         EURJPY=     117.42         117.94      -0.44%         -6.97%      +118.1500   +117.2900
 Dollar/Swiss     CHF=        0.9763         0.9835      -0.73%         -0.52%      +0.9877     +0.9746
 Sterling/Dollar  GBP=        1.2257         1.2250      +0.06%         -3.92%      +1.2279     +1.2196
 Dollar/Canadian  CAD=        1.3319         1.3302      +0.13%         -2.33%      +1.3338     +1.3277
 Australian/Doll  AUD=        0.6749         0.6756      -0.10%         -4.26%      +0.6777     +0.6737
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0874         1.0896      -0.20%         -3.38%      +1.0928     +1.0860
 Euro/Sterling    EURGBP=     0.9083         0.9041      +0.46%         +1.10%      +0.9094     +0.9038
 NZ               NZD=        0.6391         0.6363      +0.44%         -4.84%      +0.6409     +0.6366
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.9659         8.9776      -0.13%         +3.79%      +9.0137     +8.9333
 Euro/Norway      EURNOK=     9.9845         9.9449      +0.40%         +0.79%      +9.9941     +9.9225
 Dollar/Sweden    SEK=        9.6246         9.6767      -0.03%         +7.37%      +9.6983     +9.6206
 Euro/Sweden      EURSEK=     10.7184        10.7215     -0.03%         +4.43%      +10.7335    +10.6910
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Jonathan Oatis and Bernadette Baum)
  
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