By Gregor Stuart Hunter
SINGAPORE (Reuters) -The U.S. dollar clawed back some ground in Asian trading on Tuesday following five days of selling, ahead of the return of U.S. traders from the Labor Day holiday.
The dollar index was last up 0.2% at 97.873, having touched its lowest since July 28 on Monday. Gold hit an all-time high.
“Capital markets across equities and credit are still optimistic on the U.S., which suggests that foreign holders of U.S. assets are not in retreat,” analysts from DBS wrote in a client note.
Traders have sold the greenback as U.S. President Donald Trump’s attacks on the Federal Reserve, including his decision to remove Governor Lisa Cook, raise fear that the White House is undermining the central bank’s independence at a time when the case to begin cutting interest rates is far from clear.
“The Fed could be ominously poised to start its rate-cutting cycle,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “People see the attraction of being in gold.”
Bullion reached a record high of $3,508.50 after notching up a sixth day of gain on Tuesday. It was last up 0.5% at $3,494 per ounce. Silver advanced 0.2% to within reach of a 14-year high set on Monday.
Trump’s appointments to the Fed are likely to further weigh on the dollar, according to DBS. “Already, the labour market is softening, and Chair Powell has signalled the possibility of rate cuts at Jackson Hole,” the analysts wrote. “This means that the overvalued USD could ease again as markets anticipate coming Fed rate cuts.”
Against the yen, the dollar was 0.4% stronger at 147.81 yen, after Bank of Japan Deputy Governor Ryozo Himino struck a dovish tone on Tuesday, saying the central bank should keep raising interest rates but also warning that global economic uncertainty remained high, suggesting it was in no rush to push up still-low borrowing costs.
An auction of 10-year Japanese government bonds (JGBs) on Tuesday also drew the strongest demand in almost two years.
U.S. economic data for August will be in focus later this week as market watchers try to ascertain the extent to which Trump’s policies are affecting industrial activity and the labour market. Data due include ISM’s manufacturing and services purchasing managers’ indices and the non-farm payrolls report.
The euro slipped, last off 0.2% at $1.1690 so far in Asia, after data released on Monday showed the HCOB euro zone manufacturing PMI expanded in August for the first time in three years. Consumer price data for the same month is due later on Tuesday.
The Australian dollar paused for breath after five days of gain, last trading down 0.3% at $0.6538, near its highest in more than two weeks.
The kiwi traded 0.3% lower at $0.5884 to snap a three-day winning streak, which had pushed the currency to a two-week high.
Sterling traded at $1.3526, down 0.1% so far on the day, retreating from a two-week high reached on Monday.
(Reporting by Gregor Stuart Hunter; Editing by Christopher Cushing and Sonali Paul)
