Phillip Inman and Graeme Wearden
4 min read
Analysts said a US economic slowdown and expected rises in government debts were driving investors away from the dollar.</span><span>Photograph: Justin Lane/EPA</span>" height="768" loading="eager" src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///ywAAAAAAQABAAACAUwAOw==" width="960">
The dollar sank to its lowest level in more than three years on Thursday and the FTSE 100 closed at a record high as Donald Trump’s latest trade threats and the weakening economy appeared to bring forward interest rate cuts by the Federal Reserve.
Foreign exchange traders sold the dollar in favour of the yen and the euro, which both climbed by about 1% against the US currency to leave it almost 10% down on its value against a basket of currencies since the beginning of the year.
In London, the FTSE 100 ended the day at 8,884 points, above the previous closing high of 8,871 points set on 3 March this year, as investors looked for alternatives to US company shares.
Analysts said there was little appetite to buy dollars at a time when recent data showed the jobs market weakening and while erratic White House policies clouded the outlook for the US economy.
The slide came after the US president revived last month’s threat to unilaterally impose country-specific tariff rates within the next two weeks. “We’re going to be sending letters out in about a week and a half, two weeks, to countries, telling them what the deal is,” Trump told an event in Washington on Wednesday.
Markets were also unsettled by growing speculation that the Federal Reserve would begin to cut the cost of borrowing more quickly than expected after consumer inflation came in lower than expected and producer inflation dropped.
Weaker job hiring was another factor after the four-week average number of initial applications for unemployment support rose by 5,000 to 240,250 in May, the highest since August 2023.
“There’s clearly solid dollar selling,” said Kit Juckes, the chief foreign exchange strategist at Société Générale.
On the FTSE rally, Neil Wilson, the UK investor strategist at Saxo Markets, said: “I think we have clearly seen a rotation in global equity markets as investors have for the first time in years questioned the TINATA – there is no alternative to America.
“Investors are looking elsewhere and consistently conversations with clients revolve around geographic diversification and reducing exposure to the US.”
India and the US were also said to be at loggerheads in talks on steel and aluminium imports imposed by Washington and the threat of import duties on Indian pharmaceuticals, leading to speculation that if the talks break down, Delhi may retaliate with tariffs on US imports.
Bloomberg reported that India’s negotiators had objected to a long list of US demands that included allowing genetically modified crops to be imported and the easing of price controls on medical devices.
