News  

Dollar extends gains after Fed’s long-awaited rate hike

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

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

The dollar extended its gains in Asia on Thursday after the US Federal Reserve’s landmark decision to lift interest rates for the first time in almost a decade.

The move ended months of market uncertainty and reflected the central bank’s growing confidence in the world’s top economy.

The bank raised its key federal funds rate to 0.25-0.50 percent, and modestly boosted its view of the economy.

Fed chair Janet Yellen said the decision “recognises the considerable progress that has been made toward restoring jobs, raising incomes, and easing the economic hardship of millions of Americans”.

Rates were cut to near-zero in 2008 by the Fed as part of a drive to fend off the ravages of the global financial crisis as it tore into the US economy, scything jobs and sending world stocks into freefall.

The bank now sees US growth picking up pace to 2.4 percent next year despite a slowdown in most other world economies, particularly China, and also stressed future rate hikes would be “gradual”, forecasting 100 basis points over 2016.

The dollar has been rising for months on expectations of the latest move, as higher rates offered investors the prospect of better returns on dollar-denominated assets.

In Tokyo, the greenback strengthened to 122.50 yen from 122.26 yen Wednesday in New York after the Fed announcement, and 121.86 yen earlier in Asia.

The euro weakened to $1.0855 from $1.0911 in New York and $1.0936 in Tokyo before the announcement.

The British pound, Swiss Franc and Australian dollar were lower against the US unit.

Emerging currencies including the Singapore dollar, South Korean won, Malaysian ringgit and Thai baht also lost ground and analysts said the greenback may still have room to rise with the pace of subsequent Fed rate hikes next year not fully priced in.

Expectations for further monetary easing measures by the Bank of Japan and European Central Bank were also likely to weigh on the euro and yen, they said.

“The dollar will continue to gain support, particularly against commodity currencies, Asian emerging-market currencies and the euro,” Mansoor Mohi-uddin, a senior markets strategist at Royal Bank of Scotland Group in Singapore, told Bloomberg News.

Receive News Alerts on Whatsapp: +2348136370421


No Comments yet

Related