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FOREX-Dollar on defensive as Trump's impeachment inquiry, weak data weigh

Published 25/09/2019, 04:29
© Reuters.  FOREX-Dollar on defensive as Trump's impeachment inquiry, weak data weigh
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* U.S. House Speaker announces launch of impeachment inquiry

* Impeachment process could drag on, may disrupt Sino-U.S.

talks

* Trump steps up rhetoric on China, dampens trade deal hopes

* Pound buoyed after Supreme Court ruling, outlook unclear

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Hideyuki Sano

TOKYO, Sept 25 (Reuters) - The dollar steadied in Asian

trade on Wednesday but remained on the defensive after the

launch of a formal impeachment inquiry against President Donald

Trump, while the political uncertainty added to worries about

economies strained by the Sino-U.S. trade row.

Following reports Trump sought foreign help to smear

Democratic presidential front-runner Joe Biden, House Speaker

Nancy Pelosi announced the House would initiate a formal

inquiry, saying Trump appeared to have undermined national

security and violated the U.S. Constitution. The dollar bounced slightly in Asia after falling in U.S.

trade overnight following Pelosi's move, which was announced

late on Tuesday.

"There was a bit of position unwinding in Asia. After all,

the impeachment process could take months. Still, it's not good

news (for the dollar)," said Koichi Kobayashi, manager of

currency trade at Mitsubishi UFJ Trust Bank.

The dollar ticked up 0.2% to 107.28 yen JPY= , having

slipped to a two-week low of 106.96 the previous day.

The safe-haven Swiss franc edged back to 0.9866 franc per

dollar CHF= from near three-week high of 0.9845 to the dollar

on Tuesday.

The euro, which was battered by weak euro zone economic data

earlier this week, inched down 0.2% to $1.1001 EUR= , a hair's

breath off Monday's low of $1.0966.

Trump promised on Tuesday to release a transcript of his

phone call with Ukrainian President Volodymyr Zelenskiy amid

reports he withheld nearly $400 million in U.S. aid to Ukraine

as leverage to get Zelenskiy to launch a probe that would damage

Biden.

Although it is far from certain whether the inquiry will

eventually lead to an impeachment, which needs a two-thirds

majority in the Republican-controled Senate, increased political

uncertainty is seen as negative for the dollar.

Some market players also suspect domestic political fights

will consume Trump's political capital, making it harder for him

to strike any compromise with China on trade and other issues.

On Tuesday, Trump's rhetoric on China turned harsh once

again as he delivered a stinging rebuke to Beijing's trade

practices at the United Nations General Assembly, saying he

would not accept a "bad deal" in U.S.-China trade negotiations.

China's top diplomat Wang Yi quickly hit back, saying

Beijing would not be threatened on trade or allow interference

in its affairs, including Hong Kong, while having no intention

to "play the Game of Thrones on the world stage". "Trump's speech was full of sensitive words for China -

trade practices, currencies, freedom of religion and so on. It

is not hard to imagine it will irritate China," said Daisuke

Uno, chief strategist at Sumitomo Mitsui Bank.

"In the past China has reacted to U.S. pressure on trade by

bringing down the yuan. It appears we are having that settings

again," he said.

The Chinese yuan was steady at 7.1088 per dollar in onshore

trade CNY=CFXS , keeping some distance from 11-1/2-year lows of

7.1854 touched earlier this month.

The dollar was also undermined by data showing U.S. consumer

confidence USCONC=ECI fell by the most in nine months in

September, far more than expected. "Net-net, consumer confidence plunged in September which

counts as a big surprise that may sidetrack the economic

expansion that is relying on consumer spending to fuel growth,"

said Chris Rupkey, chief financial economist at MUFG Bank in New

York.

"This unwelcome news on souring consumer spirits is a

startling new development that could even bring more rate cuts

later this year from the Federal Reserve," he said.

Elsewhere, the British pound found some support after the UK

Supreme Court ruled that Prime Minister Boris Johnson's decision

to suspend parliament for five weeks was unlawful in a further

blow to his ambition to pull Britain out of European Union next

month with or without a deal. Still, market players saw no signs of a sustainable rebound

as the events further deepened the uncertainty investors now

attach to the currency.

Sterling changed hands at $1.2467 GBP=D4 , down 0.2% on the

back of a broad pullback in the dollar in Asia but still not far

from two-month high of $1.2582 set last week.

The New Zealand dollar edged up 0.16% to $0.6333 NZD=D4

after the Reserve Bank of New Zealand kept interest rates on

hold, as widely expected.

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