Dollar weak on trade war worries; Draghi's comments help euro

NEW YORK: The dollar slipped against a basket of currencies on Monday, on persistent worries about a potential trade conflict between the United States and China and as the euro rose following comments from European Central Bank President Mario Draghi that were deemed supportive of the common currency.

The dollar index, which measures the greenback against a basket of six other major currencies, was down 0.19 percent at 89.941, after slipping to a one-week low of 89.835.

"I think some of this is related to trade war tensions. That theme has been coming and going these past few days," said Brad Bechtel, managing director FX at Jefferies, in New York.

Global markets took a hit last week as U.S. President Donald Trump upped the ante in a trade dispute with China, reviving investor jitters about the impact a tariff war could have on the world economy.

China is evaluating the potential impact of a gradual yuan depreciation as a tool in the escalating trade dispute with the United States, Bloomberg News reported on Monday, citing people familiar with the matter.

"Who knows where that's coming from, to be exact, but at the same time there is a layer of uncertainty in the markets a little bit," said Bechtel.

Meanwhile, the euro, was up 0.24 percent against the greenback. A slide in stock markets this year has not materially impacted euro zone financial conditions, European Central Bank President Mario Draghi said on Monday, suggesting that policymakers remain calm about the recent market volatility.

"That's, at the margin, pushing the euro higher" said Bechtel.

While Draghi's comments were not materially a surprise, analysts said the move in the euro may have been exaggerated in a thin market which is expecting some more clarity on the trade war front when President Xi Jinping speaks at the Boao Forum for Asia in the southern province of Hainan on Tuesday.

"Draghi's comments were a bit more supportive of the euro than what he signaled at the ECB press conference and markets are clutching at that," said Viraj Patel, an FX strategist at ING Bank in London.

The British pound rose against the U.S. dollar and was on track for a third consecutive day of gains as investors were encouraged by data showing British house prices rising more than expected in March.

Sterling was up 0.24 percent at $1.4124.

The greenback was 3.72  percent higher against the rouble , after the United States hit Russian companies and officials as part of a round of new sanctions against Moscow.

The loonie and the Mexican peso climbed against the U.S. dollar after White House economic adviser Larry Kudlow said progress was being made on efforts to renegotiate the North American Free Trade Agreement and that there should be "much greater currency cooperation" between the United States and Mexico.