The dangers of Donald Trump’s protectionist policy were thrown into the limelight again over the weekend, after an immigration ban pushed investors away from the dollar and towards the safety of the yen.
The pound recovered slightly at the end of last week after five months of lows, as early comments on Trump’s economic policy boosted investor confidence. However Trump’s temporary ban on foreign nationals, which was enacted over the weekend and prompted thousands to gather in major cities, reminded investors of the problems of a protectionist policy.
“Concerns on protectionism appear to be rising after President Trump’s executive order to restrict immigration,” said Adam Cole, head of G10 FX strategy with RBC in London told Reuters.
Weaker-than-expected economic growth data also contributed to the fall, which saw the dollar trade down as much as 0.7 percent against the yen on Monday morning. Official figures released on Friday showed the US economy grew at 1.9 percent in the fourth quarter of the year, well below the 2.2 percent expected by analysts and a significant drop from the 3.5 percent growth seen in the third quarter.
A weakness in Japanese stocks on Monday also prompted investors to buy the Yen, fuelling its rise against the dollar. The benchmark Nikkei Stock Average was down 0.6 percent at midday in Asian trade, with the Japanese currency up against both the Australian dollar and the British pound.
There are worries that Trump’s administration may be intending to keep the dollar low, in order to change relations between US and other trading countries including China. However, this approach has been actively denied by Trump’s economic ministry.
The Yen is currently up 0.53 percent against the pound, up 0.43 percent against the euro and 0.38 percent against the dollar (1016GMT).