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Trump’s Fed attack sees dollar dive and emerging markets rally

Critical comments by US President Donald Trump about the country’s central bank saw the dollar fall for the fourth straight day in its worst spell since March, boosting emerging market stocks and currencies in the process.

In an exclusive interview with Reuters, Mr Trump said he was “not thrilled” with the Federal Reserve under his own appointee, chairman Jerome Powell, for raising interest rates, and said the Fed should do more to help him to boost the economy.

American presidents have rarely criticised the Fed in recent decades because its independence has been seen as important for economic stability.

“The Fed is independent in setting monetary policy and markets were spooked by yet another comment from Donald Trump criticising higher interest rates,” said Artjom Hatsaturjants, an analyst at Accendo Markets.

The dollar index, which tracks performance against a basket of six major currencies, fell 0.39 per cent yesterday.

It has now fallen 1.2 per cent in the last four days, its worst such run since late March.

The dollar’s weakness took pressure off many emerging markets, which have struggled in recent weeks as worries over Turkey precipitated a sell-off across the globe. MSCI’s benchmark emerging equities index rose one per cent and was set for a third day of gains after Mr Trump’s comments.

Chinese mainland shares jumped 1.8 per cent, South Korea one per cent and Indonesia 0.9 per cent. In Europe, Turkish stocks rose 1.6 per cent and Polish shares 0.8 per cent.

The Chinese yuan rose by 0.17 per cent to 6.8427 per dollar.

The currency was on track for its fourth session of gains, pulling further away from 6.934, its weakest since January 2017 marked last week.

The yuan had weakened to a 19-month low against the dollar earlier this month amid concerns over the country's economic growth, a Sino-US trade war and a broad rally by the dollar.

In his Reuters interview, Mr Trump also accused China of manipulating its currency and said there was little hope of progress in the ongoing trade dispute between the two countries in talks due this week.

Other emerging-market currencies, including the South African rand, Thai baht, Mexican peso, Hungarian forint and Polish zloty were all higher by 0.2 to 0.9 per cent against the dollar.

Commodities that are priced in dollars and so benefit from any weakness were also higher across the board.

Base metals prices rose, with London copper climbing for a second day and crossing the $6,000-a-tonne mark. Spot gold rose 0.28 per cent to $1,193.

Brent crude oil rose 0.33 per cent to $72.45 per barrel.

Futures in the United States yesterday pointed to the blue-chip S&P 500 index opening 0.2 per cent higher.

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