By Gertrude Chavez-Dreyfuss and Sam Forgione
NEW YORK (Reuters) - The dollar dropped to a seven-week low against a basket of major currencies on Wednesday, pressured by the prevailing uncertainty surrounding President Donald Trump's economic policy.
The U.S. currency has fallen in four of the last five sessions after gaining 7 percent in the last three months of 2016. The dollar has especially struggled against the yen, falling 3 percent since the beginning of the year.
Sterling, meanwhile, jumped above $1.26 against the U.S. dollar for the first time in six weeks on hopes for a trade deal between Britain and the United States, which Prime Minister Theresa May said on Wednesday would "put UK interests and UK values first."
"There's a lack of conviction in dollar longs at the moment," said Mazen Issa, senior FX strategist, at TD Securities in New York.
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"All that Trump-based optimism over reflationary trades is being questioned. At this point in time with all the back and forth in the headlines with respect to the administration's policy, the watchword of the day has been uncertainty."
The dollar was generally weaker on Wednesday despite U.S. shares gaining and the Dow Jones Industrial Average trading above 20,000 for the first time. [.N]
But the focus on Wednesday shifted away from policies that might boost growth. Trump was expected later in the day to start signing executive orders dealing with immigration and national security.
"Rather than hearing about fiscal stimulus, which I think most people assume is the gateway to higher interest rates and a stronger dollar, out of the gate from Trump we've heard about building a wall and trade protectionism," said David Gilmore, partner at FX Analytics in Essex, Connecticut.
The dollar index <.DXY> was last down 0.4 percent at 99.928 after touching 99.835. That marked its lowest level since Dec. 8 and a nearly 4 percent decline from a 14-year high hit at the start of the year.
Sterling, on the other hand, was last up 0.9 percent at $1.2632 after hitting a six-week high of $1.2638 <GBP=D4>. The euro was up 0.2 percent against the dollar at $1.0751, hovering near Tuesday's seven-week high of $1.0774.
The dollar was down 0.5 percent against the yen at 113.21 yen <JPY=>. The Australian dollar bucked the trend and fell against the greenback to a six-day low of US$0.7516 <AUD=> after both quarterly and annual inflation undershot expectations, rekindling hopes of one more rate cut from the Reserve Bank of Australia (RBA).
(Reporting by Gertrude Chavez-Dreyfuss and Sam Forgione; Editing by Andrew Hay)