Concern over economic growth last week drove the dollar to its worst performance in more than four years.
LONDON: The dollar hovered near a 14-month low against the yen on Wednesday as investors grew cautious about the outlook of the greenback after a top economic advisor to the Trump administration resigned stoking fears of a trade war.
Market watchers said the departure of economic adviser Gary Cohn, a former Wall Street banker, would embolden protectionist forces in the U.S. administration as Trump tries to impose hefty tariffs on steel and aluminium.
"The resignation of White House chief economic adviser Gary Cohn may be all the confirmation global markets need that the U.S. administration’s protectionist policy agenda is more than just a political show," ING strategists wrote in a daily note.
The dollar tumbled 0.4 percent to 105.45 yen its lowest since Monday and within touching distance of a 14-month low of 105.24 hit last Friday.
Against a basket of currencies, the dollar was a shade lower at 89.56.
Cohn's departure is the latest in a series of steps taken by the Trump administration to assert protectionist policies including withdrawing the U.S. from the Trans-Pacific Partnership, instigating a renegotiation of NAFTA and imposing hefty import tariffs on some targeted products.
"The voices of reason in the White House are dwindling and the risk of a trade war is increasing," Commerzbank strategists wrote in a daily note.
Market watchers such as HSBC said the escalation of the trade war rhetoric would lead to a lower dollar as the markets focus on the structural weaknesses of the U.S. deficits but that could spread to a weakness in emerging market currencies if trade war escalates.
The euro was broadly flat on the day, a day before a policy meeting where policymakers are expected to provide more detail on when the ECB will wind up its massive stimulus scheme.
Elsewhere, the Canadian dollar was on the back foot, with the currency down 0.4 percent against the greenback before a policy meeting later in the session where the central bank is likely to hold interest rates. - Reuters
Limited time offer:
Just RM5 per month.
