Investing.com - The dollar fell in Asia on Wednesday with the chaotic U.S. political situation weighing on expectations for economic policies favoring tax cuts and higher spending and as key lawmakers call for a memo reportedly written by former FBI director James Comey on Trump discussing an active investigation to be released.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.13% to 97.97. USD/JPY changed hands at 112.62, down 0.43%, while AUD/USD dipped 0.15% to 0.7415. EUR/UISD rose 0.11% to 1.1095.
Japan reports core machinery orders for March with a 0.6% gain seen year-on-year and a 2.1% increase expected month-on-month. Australia will also update on its wage price index for the first quarter with a gain of 0.5% seen quarter-on-quarter and 1.9% year-on-year.
"Investors are deeply concerned that all the political noise will morph into economic risk as the political back-fence talk, speculation and dirty laundry could detract from Trump's key agenda: Tax reform," Stephen Innes, senior trader at OANDA, said in a note on Wednesday.
"While there is no particular headline behind the move, a likely combination of slipping U.S. yields, softer oil prices and heightened political uncertainty in Washington are providing traders with this morning's toxic dollar elixir. While the market is fishing for a base this morning, momentum does suggest there is the potential for a deeper U.S. dollar selloff," OANDA's Innes said.
Elsewhere, China’s central bank made its biggest one-day cash injection into the markets on Tuesday to soother confidence after a recent campaign to tamp down speculative investing fueled by debt.
The People’s Bank of China pumped a net 170 billion yuan ($24.7 billion) into the financial system via its daily money-market operation, the largest amount since just before the Lunar New Year holiday in January.
Overnight, the dollar slumped against a basket of major currencies on Tuesday, after reports surfaced that President Donald Trump shared sensitive information with Russia at a meeting last week.
Trump took to twitter on Tuesday to defend his decision to share sensitive information with Russia, insisting that he had “the absolute right” to share “facts” about terrorism with Russia.
This latest U.S. political saga, came a week after Trump abruptly fired Comey, and added to concerns that ongoing political turmoil in Washington could prove a distraction to the Trump administration and delay its plans to move forward with its economic agenda, which includes tax reform and deregulation.
Elsewhere, a mixed bout of economic data weighed on the greenback, after U.S. housing data fell short of expectations while industrial production expanded at the fastest pace in more than three years.
The Federal Reserve said Tuesday that U.S. industrial production at factories, mines and utilities rose 1% in April from March, well above expectations for 0.4% increase.
In a separate report on Tuesday, the Commerce Department said housing starts dropped 2.6% to a seasonally adjusted annual rate of 1.17 million units, the lowest level in five months, and below expectations for a 3.7% rise.