* Political tumult in Washington weighs on greenback
* Dollar index poised for weekly loss of 1.6 pct
* Euro boosted by ECB expectations, lower political risk
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, May 19 The dollar was on track to record
its worst week since August on Friday, having given up almost
all the gains made since Donald Trump, now surrounded by
political worries, was elected U.S. president last year.
The dollar index, which measures the greenback against a
basket of six major rivals, has fallen around 1.6 percent this
week, hitting its lowest since Nov. 9 - the day of the
U.S. election results - on Wednesday and edging back 0.3 percent
down close to that trough on Friday.
Political uproar over - among other things - Trump's firing
of former FBI director James Comey, allegations he pressed Comey
to stop investigating his former national security chief, and
his campaign's alleged ties with Russia, have pressured the
Analysts said the reason the dollar was being pressured by
the turmoil was not just because of uncertainity over Trump now
serving a full term; it was also because the controversies meant
the policies Trump had promised - in particular on fiscal
stimulus - that had given markets a "Trump bump" were less
likely to be pushed through any time soon.
"The market is fearful now that the cuts in regulation, the
tax incentives, etc., just won't be forthcoming because the
administration will be so busy fire-fighting scandals, it won't
be able to push through any of its promises," said Rabobank
currency strategist Jane Foley, in London.
Foley added that worries over Trump had also coincided with
a run of weaker U.S. data that has seen a slight pull-back of
expectations that the Federal Reserve will hike interest rates
next month, which had also pressured the dollar.
The euro, which makes up more than half of the dollar index,
has benefited from the dollar's strength but has also had its
own upward drivers, with political risk having eased and with
talk about the European Central Bank winding back its expansive
monetary stimulus programme as the euro zone economy recovers.
The single currency hit a six-month high on Thursday and was
close to that peak on Friday at $1.1139, up a third of a
percent on the day.
The dollar had gained some reprieve on Thursday, helped by
solid U.S. economic data, including a jump in the Philadelphia
Fed's gauge of mid-Atlantic manufacturing activity in May.
But focus was likely to remain on the Trump administration's
troubles and that could continue to weigh on the dollar,
"I think we will get a lot more ... headlines in coming
weeks and months, especially as the investigations take place,"
said Tan Teck Leng, forex analyst for UBS Wealth Management in
Singapore. "It will hit sentiment for the dollar."
Against the safe-haven yen, the dollar was flat at 111.46
but was on track for its first week of falls in five,
with risk appetite having fallen across markets this week.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Masayuki Kitano in Singapore Editing
by Jeremy Gaunt)