0632 GMT February 23, 2018
Allegations have once again surfaced about the Trump administration’s links to Russia after it emerged that his administration had divulged classified information to the Russian foreign minister.
That was followed late Tuesday by revelations that recently-fired FBI boss James Comey was pressed by Trump to drop an ongoing investigation into former national security adviser Michael Flynn over his links to Moscow.
The moves by Trump have been described by some, including top Republicans and Democrats, as an obstruction of justice.
The turmoil raised questions over whether obstruction of justice charges could be levied against Trump, weakening confidence in his ability to go ahead with an aggressive stimulus program investors had been depending on since his election in November.
Greg McKenna, chief market strategist at AxiTrader, said "What's potentially important for markets in the weeks and months ahead is that the president's apparent missteps may galvanize his opponents, which could make it harder to implement his economic agenda."
On Wednesday, the dollar index went down 0.13% to 97.97. AUD/USD dipped 0.15% to 0.7415.
The euro broke above $1.11 to an extent not seen since November, while the yen is also increasing pressure on the US unit. The dollar bought 112.30 yen, well down from levels above 114 yen seen last week.
The 10-year US Treasuries yield US10YT=RR dipped to 2.294 percent, flirting with its lowest level in the past two weeks.
"At the very least the view is that Trump's economic policies will be delayed over this, and the dollar is being sold," Tomoichiro Kubota, an analyst at Matsui Securities in Tokyo, told Bloomberg News.
"At the moment there's a strong sense of investors trying to gauge how far this will go. It's a situation where you can't completely rule out the possibility of impeachment down the road, so it's difficult for investors to buy."
In addition, economic data published Tuesday cast more doubt on some rosy views about the US economy.