The US Dollar has been hitting a new low against a basket of currencies, including Singapore dollar, currently trading at US$1: SG$1.36. That is the lowest it has been for 2017, coming down by 6.1% since December 2016 when it was trading at US$1: SG$1.45.
1. Russian investigation weighing down
Bullish investors have been confident in the US market ever since President Trump was elected into office due to his pro-business stance, and promises of tax-reforms.
However, the White House has been hit by endless scandals over the past year, especially when it comes to the Russian investigation where Robert Mueller has now been appointed as special counsel to investigate Trump’s campaign’s possible collusion with Russia.
The investigation has now exposed more evidence of possible collusion with Russia as Donald Trump Junior is now embroiled in the latest scandal involving a meeting with a Russian lawyer.
With the emails provided by Donald Trump Junior clearly stating that the meeting was to provide “information that would incriminate Hillary and her dealings with Russia and would be very useful to your father”, and that it was “part of Russia and its government’s support for Mr Trump”, the Russian-collusion scandal is now much more than just “witch hunt”, which President Trump has claimed it to be.
The constant chaos and turmoil that the White House is facing have been indicative of the obstacles that President Trump will have to overcome to administer his pro-growth agenda.
Meanwhile, investors are losing confidence as the administration steps into its seventh month of administration and not producing many results of what has been promised.
2. Investigation into President Trump’s business
As the Russian scandal grows bigger each day, news broke that special counsel Robert Mueller is now expanding his probe into the President’s businesses. Russia-related transactions such as “Russian purchases of apartments in Trump buildings”, “the 2013 Miss Universe pageant in Moscow” etc. are reportedly being scrutinised by the FBI investigators.
On the day that this was reported, major US stock indices fell as investors questioned if Trump could push on his pro-business agenda. Should the Russian investigation persists and more scandals break out, it will be likely that investors confidence will continue to plummet.
3. Failure to repeal and replace Obamacare
The Republicans’ latest attempt to repeal and replace Obamacare was dead on arrival as the party was split on the terms of the newly proposed healthcare bill.
Some are concerned that the new bill will not sufficiently protect Americans as 22 million people will lose insurance coverage under the new bill. Others are complaining that it does not go far enough to repeal all of Obamacare taxes and lowering premium.
Senate Majority Leader Mitch McConnell did not even have enough votes from his party to begin debate on this legislation to repeal and replace the Obamacare despite the Republican party control of the Senate.
That was yet another piece of devastating news for the dollar as investors were disappointed with Trump’s policy execution. Especially as it becomes clear that despite holding the majority, the Republican party will still be stuck in legislative gridlock, which makes the possibility of future tax reform less likely.
Donald Trump’s refusal to take responsibility over the healthcare bill also does not inspire confidence as he said in an interview that the party would let Obamacare fail and he was not going to “own it” and “the Republicans are not going to own it”.
The Washington Post has helped to compile the many times that President Trump has promised to “immediately” repeal and replace Obamacare. His current stance of “not going to own it” may be revealing of the way that he will treat his other campaign promises.
4. FED’s dovish stance
Besides the scandals involving President Trump and his campaign, the US Federal Reserve (FED) also played a part in the US Dollar’s weakness when FED Chair Janet Yellen voiced the concern of low inflation.
Earlier in July 2017, at a meeting with the Congress, Yellen reiterated that rates are close to a “neutral” level. It seemed that the “FED’s benchmark rate is not accelerating nor restraining the economy”, according to CNBC.
That has driven down the dollar as investors took her statement as more dovish than expected. Yellen maintains that gradual rate hikes still have to happen over “the next few years”.
But investors are not anticipating one shortly as “neutral” stance continues for now.
Overall the dollar seems to be poised for a longer period of weakness for now, having stayed at its current low for the past few days.
As President Trump’s team continues to be surrounded by scandals, perhaps stronger growth numbers from the US economy will be needed to turn investors bullish again.