Dollar drops on Trump comments as May boosts pound

London - The dollar weakened and gold advanced with bonds after the President-elect said the US currency is already "too strong."

The pound rallied as British Prime Minister Theresa May laid out plans to leave the European Union.

The greenback fell against most peers after Donald Trump told the Wall Street Journal its value is too high in part because China holds down its currency.

UK and European equities retreated a second day while sterling strengthened almost 2%, the biggest major gainer against the dollar. The Bloomberg Commodity Index rose to the highest since July on a closing basis.

"The dollar is the guiding light at this point and all eyes are on the shape US policy will take," said Fredrik Nerbrand, global head of asset allocation at HSBC Holdings in London.

"I would put today’s dollar weakness down to noise rather than a structural shift. If Trump wants to become as growth-generative as he’s planning to be and you don’t have the same fiscal push coming from the rest of the world, then it’s a question of where does the capital flow to.

The dollar is the tallest pygmy."

The dollar was buffeted as traders puzzled over the meaning of Trump’s comment before his inauguration on Friday.
 
Meanwhile the pound staged a relief rally as May confirmed in her speech that Britain will leave the single market and the customs union, and that parliament will get a vote on the final deal.

The Bloomberg Dollar Spot Index lost 1.1% at 7:38 New York times to the lowest the lowest level in a month. The pound gained 1.9% to $1.2281, the most since July.