By Chelsey Dulaney and Hiroyuki Kachi
The dollar's rout deepened Thursday as investors tempered their optimism over President-elect Donald Trump's economic policy proposals after his first news conference since the U.S. election.
The WSJ Dollar Index, a measure of the U.S. dollar against a basket of 16 currencies, was down 0.5% at 92, on track for its lowest closing value in a month. The index has lost nearly 1% this week.
In a wide-ranging news conference Wednesday, Mr. Trump failed to give more details on his administration's plans for fiscal stimulus, deregulation or tax cuts. Expectations that these policies will boost U.S.economic growth have underpinned the dollar's rally since the election.
"The press conference didn't tell us anything we didn't know already," said Alvise Marino, a foreign-exchange strategist at Credit Suisse. Mr. Marino added that investors were heavily bullish on the dollar heading into the press conference, which is exacerbating the selloff.
Hedge funds were holding roughly $26 billion in bullish dollar bets through last week, according to Commodity Futures Trading Commission data, near a one-year high. To unwind those positions, investors essentially sell the dollar and buy currencies such as the Japanese yen and Canadian dollar. The yen is up 1.3% against the dollar, while the Canadian dollar is up 0.4%.
A strong U.S. retail sales report, due out Friday, could help the dollar recover, said Daniel Katzive head of FX strategy for North America at BNP Paribas.
"If the data on the real economy starts to echo the strength in sentiment, then you're going to see...the dollar regain its footing," he said.
But analysts pointed to Mr. Trump's inauguration on Jan. 20 as the next big test for the dollar. That speech will be scripted and is likely to more deliberately touch on the matters most pertinent to global currency and bond markets, economists said.
"After inauguration, the main risk is action on the trade front," Mr. Marino said. "He can label China a currency manipulator, he can withdraw from Nafta. Those are concerns that are not going to fade away."
Emerging-market currencies were broadly stronger on Thursday. The dollar slid 1.8% against the South African rand, 2.7% against the Turkish lira and 0.2% against the Mexican peso.
China guided the yuan stronger against the dollar, and in offshore trading the Chinese currency gained about 0.4% against the dollar.
Emerging-market assets have been sold aggressively since Mr. Trump's election, pressured by the stronger U.S. dollar and the president-elect's protectionist trade rhetoric.
--James Glynn and Saumya Vaishampayan contributed to this article.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com and Hiroyuki Kachi at firstname.lastname@example.org
(END) Dow Jones Newswires
January 12, 2017 16:30 ET (21:30 GMT)
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