LONDON The dollar limped toward its worst week since last July on Friday and world stocks headed for their first weekly fall in five, as storms surrounding Donald Trump’s U.S. presidency and Latin America’s biggest economy, Brazil, began to calm.
It has been the most eventful week of the year so far for investors, with leading share markets scaling record highs and then plunging in one of the sharpest cross-asset routs in years.
Wall Street was expected to nudge higher when it reopens after a tentative recovery on Thursday [.N]. Europe and Tokyo in Asia [.T] also eked out gains, while demand for safe-haven bonds had also eased.
Jitters persisted in some areas, though. The dollar sagged to its lowest level since Trump’s U.S election victory in November and safe-haven gold headed higher on the way to its best week since April.
“The frustrating element is that we are now at the mercy of equity markets,” said National Australia Bank’s global head of FX strategy, Nick Parsons.
“We can be pretty confident that 10 points on or off of the S&P 500 is a big figure on or off of dollar/yen,” he added, saying the only thing likely to break the link would be a confident-sounding Federal Reserve at its next meeting.
This week’s roller-coaster was triggered by political uproar over Trump’s firing of FBI director James Comey and allegations he pressed Comey to stop investigating his former national security chief and his campaign’s alleged ties with Russia.
Overlaying that is concern that the resultant political damage could hamper Trump’s chances of getting his promised fiscal stimulus — which has spurred markets higher since November — through Congress.
The gradual return of risk appetite on Friday also saw investors switch from highly rated U.S. Treasuries and European government bonds into higher-yielding Italian and Portuguese debt.
Like the dollar, the U.S. yield curve has slumped back to levels not seen since Trump’s election, and…