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. Last Updated: 07/27/2016

Trade, Clinton Worries Weaken Dollar's Value




LONDON -- The U.S. dollar hit seven-week lows against the Deutsche mark and five-week lows against the Japanese yen Monday, pressured by the possible impeachment of President Bill Clinton and by U.S.-Japanese trade worries.


Impeachment worries also sent short-dated dollar option prices higher with traders scrambling to protect against the fallout of Clinton's possible impeachment exit.


Weak U.S. and Brazilian stock markets also pushed the dollar down. European share markets felt the knock and retreated accordingly.


"The market is getting quite worried about impeachment," said David Brickman, international economist at PaineWebber.


The U.S. House of Representatives Judiciary Committee voted Saturday to impeach Clinton on four charges of perjury, abuse of power and obstruction of justice related to his affair with Monica Lewinsky. The full House will vote Thursday on the committee's charges, and if approved, the impeachment process moves to the Senate for a trial.


This week's vote in the Republican-dominated House is expected to be close. But even if votes against Clinton, dealers said it would be unlikely the Senate would vote to remove the president from office.


Although political worries over Clinton have encouraged foreign investors to pull out of U.S. assets, the dollar's recent trend lower has gained its momentum independent of the action on Capitol Hill, analysts say, with falling U.S. stock markets and commodity prices playing their part.


The U.S. stock market fell nearly 200 points last week.


"It's a case of Dow down, dollar down," said Gerard Lyons, chief economist at Japanese bank DKB.


Dollar investors also continued to watch Latin America, after Brazilian shares closed down Friday for the fourth consecutive session.


Option dealers said much of the focus has also been on key chart supports which, if broken, could accelerate the dollar's fall.


Initial support lies around the psychological 115.00 yen area and near Monday's low in the 1.6430 marks zone.


The dollar touched a low of 115.45 yen and 1.6423 marks Monday before recovering to 115.85 and 1.6520 by midday in Europe.


"The implications of the losses we have registered over the past few days are far-reaching," said Brian Kiely, technical strategist at Royal Bank of Scotland in London.


"The pace of upcoming dollar declines is important," he said. "The initial targets we are looking for are 114.47, 113.60, 111.73 and 110.60/00."


The outlook was similarly bearish for dollar/mark. "The next support is the 1.6430 area and then we could see a drop to 1.6280-1.6300," said Beat Ryff, technical analyst at Commerzbank in Frankfurt.