The US dollar headed for its worst start to a year since 2008 on Tuesday while world stock losses, already the biggest in six weeks, grew after widespread protests against President Donald Trump’s stringent curbs on travel to the United States.
Investors’ hopes for a fiscal boost to the world’s largest economy under Trump have been tempered by controversial and protectionist policies that have seen him suspend travel to the United States from seven Muslim-majority countries.
Thousands took to the streets of major US cities to oppose the travel ban, which also halts refugee arrivals, while marches in Britain added to pressure on Prime Minister Theresa May to cancel a planned state visit by Trump.
A stream of US policymakers and business executives have also slammed Trump’s stance.
The dollar edged down against a basket of six major currencies, on track for a 1.9 per cent fall this month -its worst start to the year since the financial crisis.
MSCs gauge of the world’s 46 stock markets lost a further 0.1 per’cent on Tuesday, adding to a 0.6 per cent fall on Monday which was its largest loss in a month-and-a-half.
“His actions over the last few days is another reminder that there were two sides to his campaign and Trump is just as adamant to follow through on those measures that will likely weigh on market sentiment in the coming months,” said CraigErlam, senior market analyst at OANDA.
Euro zone government bond yields edged higher as better-than-expected French and Spanish January inflation data set the tone for a bloc-wide reading due at 1000 GMT.
Economists polled by Reuters expect an annualised 1.6 per cent rise in consumer prices for the euro zone as a whole. Preliminary economic growth data also due at 1000 GMT is expected to come in at 1.7 per cent.
European bourses clawed back some ground after big losses on Monday after strong results from the likes of British online supermarket Ocado.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6 per cent, while Japan’s Nikkei dropped 1.7 per cent, its biggest fall in almost three months.
On Monday, the US S&P 500 Index fell 0.6 per cent, its biggest fall in a month, though it remained well above the levels seen before the November 8 presidential election.
Most stock markets remained up on the month, supported by signs of accelerating momentum in the global economy and lingering hopes of large fiscal stimulus from Trump.
MSCI’s ex-Japan Asian shares index was up 5.7 per cent this month, while its index of world markets was up 2.5 per cent. They were also higher than their levels before the US election.
But the mood has soured in recent sessions, especially on Monday when Trump fired the federal government’s top lawyer after she took the extraordinarily rare step of defying the White House over the travel ban.
Dollar doom
Against the yen, the dollar fell a further 0.3 per cent to113.49 yen. It is down 3.1 per cent so far this month, after three straight months of sizeable gains.
The Japanese currency showed no reaction after the Bank of Japan kept policy on hold, as expected. A string of recent data has suggested the economy is slowly regaining traction.
The euro edged up to $1.0725, consolidating after a rebound this month from a 14-year low of $1.0340 set on January 3.
In a possible sign of increased anxiety among investors, the safe-haven Swiss franc strengthened to a seven-month high of 1.0637 franc per euro on Monday.
Elevated uncertainty about Trump’s policies, including lack of details so far on his plans for tax cuts and fiscal spending, offset optimism on the US economy.
Data on Monday showed US consumer spending accelerated in December, while inflation showed some signs of picking up last month.
The core PCE price index, the Federal Reserve’s preferred inflation measure, rose 1.7 per cent on a year-on-year basis after a similar gain in November.
“We’ve seen a jump in US economic sentiment after Trump’s victory. But the improvement in hard economic data remains moderate,” said Haruka Kazama, senior economist at MizuhoResearch Institute.
“And if Trump takes more steps to limit permits for immigrants, that would surely boost inflation as the US is now near a full employment.”
The Federal Reserve, which starts its two-day policy meeting on Tuesday, is widely expected to keep interest rates unchanged as it awaits greater clarity on Trump’s economic policies.
Oil prices dipped as rising US drilling activity offset efforts by OPEC and other producers to cut output in a move to prop up the market.
Brent crude futures, the international benchmark for oil prices, were trading at $55.14 per barrel, down 0.2 per cent from Monday’s settlement price.