The U.S. dollar extended its recent rout to hit three-year lows on Wednesday after U.S. Treasury Secretary Steven Mnuchin said he welcomed a weakening in the dollar. Fears of protectionist trade policies by the United States had already pushed the greenback to a three-year low, and Mnuchin’s remark at the annual Davos summit of business and political leaders pushed it down further.
Adding to the protectionist fears, Commerce Secretary Wilbur Ross, also at the Davos summit, said U.S. trade authorities are investigating whether there is a case for taking action over China’s infringements of intellectual property.
U.S. President Donald Trump, who is scheduled to speak in Davos on Thursday, slapped steep tariffs on imported washing machines and solar panels on Monday.
Mnuchin’s comments provided a fresh trigger for dollar selling and raised questions about whether a weaker U.S. currency could provide a long-term impetus for the economy.
The dollar index .DXY, which measures the greenback against a basket of six major currencies, was down 1 percent at 89.198, slipping below 90 for the first time since December 2014. The dollar was down about 1 percent against the yen.
“It’s quite significant given that this is the first time in a very long time that a Treasury secretary has spoken against a strong dollar,” said Sireen Harajli, FX strategist at Mizuho.
U.S. Treasury debt prices slumped, also after Mnuchin’s comments. U.S. 30-year bond yields, which move inversely to prices, rose to their highest level in more than three months. In late trading, U.S. 10-year Treasury yields rose to 2.652%, from 2.622% late on Tuesday.
Oil rallied, lifted by a record 10th straight weekly decline in U.S. crude inventories. U.S. West Texas Intermediate futures CLc1 settled up US$1.14, or 1.8%, to US$65.80. Brent futures LCOc1 gained 57 cents to US$70.53 a barrel. Both benchmarks were at their highest levels since December 2014.