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US dollar in focus as traders watch G20 finance minister meeting

Mnuchin: Border tax is one alternative under study
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Mnuchin: Border tax is one alternative under study

Traders will likely watch international headlines Friday after the major events of the week have left stocks in a holding pattern.

"The next big thing is the G20 meeting, which could move currencies. I think the U.S. is going to push for a weaker dollar," said Ilya Feygin, managing director and senior strategist at WallachBeth Capital.

The G20 finance ministers and central bank governors begin a two-day meeting Friday in Germany. U.S. Treasury Secretary Steven Mnuchin is scheduled to attend.

"The most important thing is he goes over there and helps dial down the Trump rhetoric," said David Lafferty, chief market strategist of Natixis Global Asset Management. "Globally people are quite worried about Trump's trade and immigration policies and [the U.S.] pulling back from the world stage."

There will certainly be "a discussion about not wanting the dollar to be too, too strong," he said. "Clearly Trump's 'America First' policy is going to be a little dented if the dollar is too strong."

On Thursday, the U.S. dollar index fell to its lowest since early February. The greenback fell after the Federal Reserve on Wednesday took a less aggressive tone than markets expected, and after the euro strengthened on a more moderate party maintaining control in the Dutch elections. The result eased concerns that anti-EU, populist voices could gain momentum in the upcoming French election.

However, traders remain focused on near-term developments in Washington.

"The fear baked into global markets is some sort of letdown in Trump's policies not able to get through Congress," Lafferty said.

Stocks could see greater volatility Friday due to options expiration and potentially lighter trade volume toward the end of the session from the St. Patrick's Day holiday.

Economic reports scheduled for release Friday include industrial production, Atlanta Fed business expectations, consumer sentiment and leading indicators.

The weekly oil rig count is due Friday afternoon.

U.S. crude oil futures settled down 11 cents at $48.75 a barrel on Thursday, after snapping a seven-day losing streak on Wednesday.

Stocks closed mostly lower. The Nasdaq composite eked out a gain of less than a point, while the S&P 500 lost nearly 4 points to close at 2,381.

Financial stocks recovered from Wednesday's declines to lead advancers in the S&P. Health care fell as one of the worst performing sectors after Morgan Stanley downgraded Biogen and Trump proposed a near-$6 billion cut to the National Institutes of Health's spending.

"Some of this sector rotation again is built off the idea of the Trump rally continuing to run into these hurdles," Lafferty said. "You're going to continue to see a lot of churn in the industries that are doing well versus the ones that are underperforming."

As of Thursday's close, the major indexes were still on track for slight weekly gains. The S&P 500 is up more than 6 percent for the quarter so far.

"In an environment where the Fed seems comfortable with a slow pace of rates ... volatility remaining very low, for sure risky assets are going to perform well," said Andres Jaime, global FX and rates strategist at Barclays.