The dollar wallowed near a six-week low against the safe-haven yen on Wednesday, with traders cautious ahead of Britain’s general election, a European Central Bank policy decision and testimony by former FBI Director James Comey. The greenback was little changed at 109.420 yen, not far from 109.225, its lowest since April 21 plumbed overnight. The dollar has lost 0.9 percent against the yen this week, also pressured by a sharp drop in U.S. Treasury yields to seven-month lows as investors sought the safety of government debt.
The U.S. currency was seen coming under more pressure as previously bullish equities also began declining. Wall Street shares pulled away from recent record highs and fell overnight as demand for risky assets waned ahead of Thursday’s events. “The dollar has felt the tug of lower U.S. yields for a while now, but buoyant stocks had helped neutralise some of that pressure,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo. “But it lost even that support, and the dollar’s fall gathered momentum.”
Comey, who will testify on Thursday, was investigating whether Donald Trump’s presidential campaign and Russia colluded to sway the 2016 U.S. election when he was fired by Trump in May. Investors are worried his testimony could dampen already flagging momentum for Trump’s agenda of rolling back regulations and overhauling the tax code. The dollar index against a basket of major currencies was a shade lower at 96.598 following a slip to 96.515, its lowest since Nov. 9. The euro was little changed at $1.1268 after climbing about 0.2 percent overnight.
The common currency was still shy of the seven-month high of $1.1285 touched on Friday as a wait-and-see mood prevailed ahead of the European Central Bank’s policy meeting on Thursday, another of this week’s major events that the markets are bracing for. While the ECB is not expected to shift rates or make changes to its quantitative easing scheme this week, market participants will sift through President Mario Draghi’s statements for his view on the euro zone economy.
The pound was unchanged at $1.2908 after swerving between $1.2951 and $1.2873 the previous day. Sterling has seen choppy trading on polls suggesting outcomes ranging from a majority for Prime Minister Theresa May’s party to a ‘hung’ parliament in which no party has an overall majority. The Australian and New Zealand dollars were steady at $0.7507 and $0.7176, respectively.