TREASURIES-Prices gain as Trump roils dollar, raising uncertainty
(Recasts with bond rally, adds Trump comments, quotes, updates
prices)
* Trump's comments on dollar spark safety buying
* Fed begins two-day meeting
* Heavy data week anticipated
By Karen Brettell
NEW YORK, Jan 31 (Reuters) - U.S. Treasury prices gained on
Tuesday as President Donald Trump expressed concern about the
value of the dollar, sending it lower and raising demand for
safe haven U.S. bonds.
In comments targeted to the pharmaceutical industry, Trump
said currency devaluation by other countries had increased
drugmakers' outsourcing their production and called on the
companies to make more of their products in the United States.
The remarks came after Trump's new National Trade Council
head Peter Navarro suggested that Germany was benefiting from a
"grossly undervalued" exchange rate.
"It's a significant change in policy in the dollar," said
Lou Brien, a market strategist at DRW Trading in Chicago. " ...
It's destabilizing. The fact that they are talking around (the
strong dollar policy) is going to upset the markets."
Data on Tuesday also showed consumer confidence fell from a
15-year high in January, driven by a less optimistic outlook on
business conditions, jobs and consumer income.
A Chicago survey also found that business production in the
Midwest grew at a slower pace and was below economists'
expectations in January.
"Part of the story was the data," said Brien.
Benchmark 10-year notes gained 12/32 in price to
yield 2.44 percent, down from 2.48 percent late on Monday and
the lowest level since Jan. 24.
Investors are preparing for a barrage of data this week,
culminating in Friday's jobs report for January, that they will
evaluate for further signs of the strength of the U.S. economy.
The data is expected to show employers added 175,000 jobs in
the month, according to the median of 102 economists polled by
Reuters.
The U.S. Federal Reserve is expected to keep interest rates
unchanged when it concludes its two-day meeting on Wednesday, in
its first policy decision since Trump took office, as the
central bank awaits greater clarity on his economic policies.
"The Fed tomorrow will be interesting in gauging the
near-term policy bias, but no one's expecting anything in terms
of an actual increase or a definitive shift in their rhetoric,"
said Ian Lyngen, head of U.S. rates strategy at BMO Capital
Markets in New York.
"I think the market is expecting the tone to be more
optimistic and on the margin more hawkish," Lyngen said.
Treasuries are likely to gain support on Tuesday from demand
for them for month-end rebalancing.
(Editing by Lisa Von Ahn)