The dollar was lower against a basket of the other major currencies on Tuesday, weighed down by a combination of geopolitical concerns and a rallying sterling after British Prime Minister Theresa May called for a general election in June.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.38% to 99.82, after rising as high as 100.31 earlier in the session.
The dollar edged lower against the safe haven yen, with USD/JPY dipping to 108.82, not far from the five-month trough of 108.12 set on Monday.
Investors remained wary as trade talks between the U.S. and Japan got underway, with markets awaiting indications of the direction U.S. trade policy could take under President Donald Trump, who campaigned on a protectionist platform.
Heightened tensions around North Korea, which has vowed to conduct more missile tests following Sunday’s failed missile launch, also continued to weigh on the greenback.
The greenback had found some support against the Japanese currency overnight following remarks by U.S. Treasury Secretary Steven Mnuchin.
Mnuchin, in an interview in the Financial Times newspaper said that while he agreed with U.S. President Donald Trump’s view that the dollar’s strength in the short term was hurting exports, he saw a strong U.S. currency over the long term as a positive.
Last week, Trump said the dollar was getting too strong, sending the dollar index to its lowest level since late March.
The pound erased earlier losses as investors welcomed the prospect of a June election with GBP/USD surging 1.28% to 1.2725, the highest level since December 6.
Investors expect that May will win a substantial majority in the UK elections, which will prevent pro-EU MPs from pushing for a ‘soft Brexit.’ Sterling also gained ground against the euro, with EUR/GBP falling 0.71% to 0.8408. Meanwhile, the single currency moved higher against the dollar, with EUR/USD rising 0.5% to 1.0695.
Investors were continuing to monitor political developments ahead of the upcoming French presidential elections as the race tightened after a surge in polls for far-left candidate Jean-Luc Melenchon, who wants a referendum on the country’s European Union membership.
Investors have long since been anxious about front runner Marine Le Pen, leader of the far-right National Front party, who also wants to put the country’s EU membership to a vote and abandon the euro.
In the U.S., the Commerce Department reported that housing starts fell in March, likely due to bad weather, while building permits rose. Housing starts fell by 6.8% to hit a seasonally adjusted 1.215 million units last month, down from February’s total of 1.303 million units. The number of building permits issued rose 3.6% to a seasonally adjusted 1.260 million units last month from 1.213 million the month before.