The dollar continued its fall this morning after European Central Bank president Marie Draghi voiced minimal concern over the rise in the euro. That currency topped $1.25 for the first time since 2014. The MSCI Emerging Markets Currency Index jumped 0.9%, its biggest leap in more than a year.
Yesterday U.S. Treasury Secretary Steve Mnuchin kept the dollar on a downward trend by telling reporters at the Davos World Economic Forum that a weak dollar was good for U.S. trade.
This morning the dollar, which broke through support at 90 on the Dollar Spot Index (DXY) yesterday, pushed down to 88.7. Looking at a chart of the index, I don’t see significant support until the 80-82 level. That’s almost 10% lower from here. And with the U.S. Treasury and the European Central Bank saying they’re not worried, traders are likely to feel they have a free hand to push the dollar toward that mark.
The only voice of concern this morning belonged to Christine Lagarde, managing director of the International Monetary Fund, who told Bloomberg TV, “I really hope that Secretary Mnuchin has a chance to clarify exactly what he said.” And then added, “It’s not time to have any kind of currency war.”
As you’d expect, yields on the 10-year Treasury rose to 2.66% as of noon New York time, up 1 basis point, on the dollar weakness. West Texas Intermediate crude rose 0.9% to $66.29 a barrel, the highest price in almost three years. Bloomberg’s commodities index rose to its highest level since October 2015.
