Political uncertainty around the Trump administration continued to send shockwaves through global markets on Thursday as the dollar lingered near a six-month low.
Overnight, stocks in Asia fell sharply, tracking dramatic falls on Wall Street on Wednesday after reports that Donald Trump had asked former FBI Director James Comey to end an investigation into National Security Adviser Michael Flynn during an Oval Office visit back in February.
Both the Dow Jones Industrial Average and the S&P 500 slipped around 1.8 per cent and European stock markets kicked off Thursday's session lower too.
The reports sparked speculation that obstruction of justice charges might be laid against Mr Trump.
That in turn has weakened investor confidence in the President’s power to implement some of the aggressive stimulus measures he has been championing.
"The Trump rally seems to be a theme of the past," said Lukman Otunuga , an analyst at FXTM, adding that stock markets could be in store for "further punishment moving forward as political turmoil in the US and ongoing geopolitical tensions are adding to the mounting uncertainty over Trump".
Since his campaign, the former businessman has been vowing to rollback regulation and cut taxes dramatically - both promises that have particularly supported financial stocks.
Strategists at UniCredit wrote in a note that "recent rise in political tensions" was denting "expectations of US reflationary policies".
But some are now speculating that the latest move could even lead to Mr Trump leaving the presidency.
The dollar index, which measures the buck’s strength against a basket of other major currencies, was trading close to its lowest level in about half a year on Thursday morning.
Gold, which - like Japan’s yen and the Swiss franc – tends to be sought during times of political uncertainty, hovered near a two-week high.
A weak dollar also tends to support the price of gold.
