Dollar rises as bets grow Fed will hold fire

Dollar Stock and money. Photo: investing-for-the-future

Dollar Stock and money. Photo: investing-for-the-future

The dollar rose against the yen but fell against emerging market currencies Thursday in Tokyo, as investors bet the US central bank will delay its first interest rate rise in nine years.

The dollar rose to 120.85 yen, from 120.61 yen Wednesday in New York, after the release of disappointing Japanese trade figures, and the euro gained to $1.1302 from $1.1285.

The single currency was also up to 136.60 yen from 136.11 yen.

A US rate rise has been a key fear factor for investors who worry it could harm a burgeoning recovery in the world’s top economy at a time when concerns about slowing growth in China have kept global markets on edge.

While the Fed is expected to lift rates by year end, rising expectations it will hold fire when it meets on Thursday spurred optimism around the world, driving equities and oil higher and prompting buyers to snatch up riskier currencies.

The South Korean won, the Indonesian rupiah, the Taiwan dollar, as well as many other higher-yield currencies gained against the greenback.

“Asian markets are doing well today in cautious positioning ahead of the Fed rates decision, with currency moves in particular reflecting the general feeling that rates will be left unchanged,” Angus Nicholson, market analyst at IG in Melbourne, said in a note to clients.

The weakening of the yen also came after data showed Japan’s exports slowed for the second straight month in August, dragged lower by weak demand from China’s stumbling economy.

The figures also highlight the challenge facing Prime Minister Shinzo Abe as he struggles to reignite growth, the day after Standard & Poor’s cut Japan’s credit rating, saying the government had little chance of fixing underlying problems.

They will add to pressure on the country’s central bank to add more stimulus, although economists remain divided on when the Bank of Japan (BoJ) will expand its unprecedented 80 trillion yen annual asset-buying programme.

Junko Nishioka, chief economist at Sumitomo Mitsui Bank, told AFP she believes the bank will not act until the end of 2015 or early 2016, as BoJ Governor Haruhiko Kuroda remains bullish about the economy.

“The BoJ may want to wait (to see) how much China and emerging economies are going to affect Japan’s economy,” she said.

The South Korean won continued to rally days after the Standard & Poor’s ratings agency raised the country’s sovereign credit rating. The dollar fell to 1,165.95 won from 1,176.03 won Wednesday in Tokyo.

The US unit also ticked lower to 14,438 Indonesian rupiah from 14,459.50 rupiah, to Tw$32.37 from Tw$32.50, to Sg$1,3971 from Sg$1,3997 and to 4.2458 Malaysian ringgit from 4.2513 ringgit.

The dollar fell to 46.48 Philippine pesos from 46.67 pesos, and to 35.75 Thai baht from 36.00 baht.

However, it rose to 66.4600 Indian rupees from 66.4375 rupees.

The Australian dollar bought 71.85 US cents Thursday in Tokyo, up from 71.61 cents on Wednesday and well up from the six-year lows of below 69 cents touched last week.

The Chinese yuan fetched 18.97 yen from 18.88 yen.

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