Sun, Aug 24, 2014 - Page 15 News List

US dollar gains on speculation of Fed rate hike

SAFE HAVEN:The Fed’s July minutes showed that many FOMC members were leaning toward raising borrowing costs earlier than anticipated

Bloomberg and staff writer, with CNA

The Philippine peso and the Malaysian ringgit dropped the most among Asian currencies this week after indications from the US Federal Reserve that it is closer to raising interest rates bolstered demand for the US dollar.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, posted the biggest five-day gain since November as the Fed’s July minutes showed “many” Federal Open Market Committee (FOMC) members had said they might have to boost borrowing costs earlier than anticipated. Asian bonds fell this week on prospects higher US rates would drive up Treasury yields and reduce the allure of emerging-market assets.

“The broader theme is generally the stronger [US] dollar backdrop and that’s tied to the good economic data that’s heating up the debate about the slack in the US economy,” said Sim Moh Siong, a strategist at Bank of Singapore. “That debate itself was reflected in the FOMC minutes that seems to suggest a more hawkish tilt.”

The peso dropped 0.4 percent for the week to 43.835 per US dollar in Manila, according to data from Tullett Prebon PLC. Malaysia’s currency declined 0.2 percent to 3.1610, data compiled by Bloomberg show. The index tracking the greenback climbed 0.7 percent from Aug. 15 to 1,026.79, and reached a six- month high of 1,029.64 on Thursday.

In Taipei, the New Taiwan dollar strengthened 0.1 percent this week to NT$30.020. The greenback shed NT$0.032 from Thursday after the local bourse staged a strong rebound, lifting demand for the local currency, dealers said.

However, the downturn was limited by intervention by the central bank, which aimed to slow the pace of the NT dollar’s appreciation to support the nation’s exports, they added.

Elsewhere in Asia, China’s yuan dropped after disappointing factory output data.

The yuan posted its biggest weekly loss since June after HSBC said China’s preliminary purchasing managers’ index came in at 50.3 for this month. That was below the 51.7 last month and the 51.5 median estimate in a Bloomberg survey. It also edged closer to the 50 dividing line separating expansion from contraction.

The yuan dropped 0.1 percent from Aug. 15 to 6.1529 per US dollar and reached 6.1616 on Friday, China Foreign Exchange Trade System prices show.

India’s rupee climbed 0.5 percent for the week to 60.4835 against the greenback and South Korea’s won gained 0.3 percent to 1,017.75. Thailand’s baht dropped 0.1 percent to 31.924, while Vietnam’s dong was steady at 21,195.

In the West, the US dollar rallied against the euro in the longest stretch in more than two years, as data from housing to jobless claims signaled faster economic growth, bolstering speculation the Fed would raise interest rates next year.

The greenback gained 1.2 percent to US$1.3242 per euro in New York, its sixth-straight weekly rally, the longest since the period ending Jan. 13, 2012. The greenback reached US$1.3221, the strongest level since Sept. 9.

The US currency added 1.6 percent to ¥103.95 after advancing to ¥104.19, the highest since Jan. 23. The euro rose 0.4 percent to ¥137.64 .

The pound was also weak, falling for a seventh week versus the US dollar, the longest slide since 2008, as data showing inflation quickened less than economists forecast reduced bets the Bank of England was close to raising interest rates.

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