HONG KONG, China (AFP) — The dollar barrelled ever higher Thursday, sitting at an eight-month high against the yen and fuelling another rally in Tokyo stocks but traders in most other markets turned cautious.
US investors gave their Asian colleagues another strong lead with the Dow hitting a new record on Wall Street after fresh data showed further improvement in the US economy and reinforced expectations for an interest rate hike next month. Global markets have largely been piling higher since Donald Trump’s shock election win two weeks ago, with traders betting his big spending, high tax plans will bolster an already healthy economy.
However, there are concerns among emerging market governments that his threats to tear up global trade deals could lead to an era of protectionism and throw up huge US tariffs.
“There’s a favorable bias to equities, given the expectations post Trump’s election that US growth will pick up as a result of more fiscal spending and a reduction in corporate tax rates,” Chris Green, director of economics and strategy at First NZ Capital Group in Auckland, told Bloomberg News.
The near certainty that Trump’s policies will fuel inflation, forcing the Federal Reserve to lift rates, has pushed the dollar higher. On Thursday it headed towards the 113 yen mark for the first time since April — touching 112.97 yen before easing — while it was also sharply up against most other units. The tumbling yen lifted exporters on Tokyo’s Nikkei index, which ended 0.9 percent higher as it reopened after a day’s holiday.
– Rupee trouble –
But, while the across-the-board losses were pared elsewhere, traders remained cautious. Hong Kong fell 0.3 percent in the afternoon, Sydney ended flat and Seoul was off 0.8 percent. Singapore added 0.1 percent and Taipei slipped 0.3 percent.
Shanghai ended flat. Jakarta dropped more than one percent and Bangkok dipped 0.1 percent. Minutes from the Federal Reserve policy meeting this month showed most board members thought a rate hike would be appropriate “relatively soon”. And those thoughts were backed up by figures showing a surge in durable goods orders.
“The US economy is showing all the signs of being in great shape even before the addition of any Trump stimulus,” AxiTrader chief market strategist Greg McKenna said in a note.
High-yielding Asia-Pacific currencies took a beating as investors removed their cash to seek out better returns in the US. South Korea’s won fell 0.3 percent and the Australian dollar slipped 0.7 percent while there were also sharp losses for the Indonesian rupiah, Thai baht, New Zealand dollar and Malaysian ringgit.
The greenback broke above 50 Philippine pesos for the first time since the height of the financial crisis in 2008, while it also neared a record against the Indian rupee, touching 68.8425.
“The market is watching whether the (Indian) central bank prevents the currency from sliding to a new low,” Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank, said.
Oil prices edged up but were weighed by the strong dollar and unease about the chances of success for a deal within OPEC and with Russia on cutting output, with less than a week until its twice-yearly meeting.
Gold was also taking a beating, sinking more than two percent to nine-month lows around $1,185 as it succumbs to a flight from safe-haven assets. – Key figures around 0700 GMT – Tokyo – Nikkei 225: UP 0.9 percent at 18,333.41 (close) Hong Kong – Hang Seng: DOWN 0.3 percent at 22,603.12 Shanghai – Composite: UP 0.02 percent at 3,241.74 (close) Euro/dollar: DOWN at $1.0540 from $1.0551 Wednesday Dollar/yen: UP at 112.80 yen from 112.48 yen Pound/dollar: DOWN at $1.2427 from $1.2438 Oil – West Texas Intermediate: UP seven cents at $48.03 a barrel Oil – Brent North Sea: UP three cents at $48.98 New York – Dow: UP 0.3 percent at 19,083.18 (close) London – FTSE 100: DOWN less than 0.1 percent at 6,817.71 (close)
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