The US dollar yesterday extended gains across the board in Asian trade, as investors honed in on bullish comments from US Federal Reserve Chairwoman Janet Yellen on interest rates.
While the surge in the greenback to a five-month high against the yen provided another rally for Japan’s Nikkei, traders in other Asian markets were more uneasy, with foreign investors removing cash from emerging markets seeking better US returns.
Last week’s shock election of Republican US presidential candidate Donald Trump has sent tremors through global markets, with developed nations seeing broad gains, but many in Southeast Asia worried about his rhetoric on international trade agreements.
His promises to ramp up spending on infrastructure and cut taxes have led to warnings of a surge in inflation that would force the Fed to hike rates to cap prices. This in turn has led to a rush back into the US dollar.
On Thursday, Yellen all but confirmed a first rate rise in 12 months by saying such a move would be appropriate “relatively soon” at its Dec. 13 and 14 policy meeting, a year after the first and only rate hike since the financial crisis.
Her remarks came as a new batch of data showed the world’s largest economy in rude health. Weekly new jobless claims hit a 43-year low, the consumer price index posted its strongest gain in six months and monthly housing starts increased.
“I do think that the economy’s making very good progress toward our goals and that the judgment the committee reached in November still pertains,” Yellen said.
A rate hike would be appropriate “relatively soon,” supporting the prevailing market view, she told a joint congressional committee.
In her first public comments since Trump’s surprise election last week, Yellen also said she would remain in her post until the end of January next year, despite accusations from Trump that she has kept interest rates low in order to help US President Barack Obama.
“It is fully my intention to serve out that term,” she said.
However, Yellen issued a word of caution about the danger of political meddling in an independent central bank.
“Sometimes central banks have to do things that are not immediately popular,” she said.
“We’ve seen really terrible things in countries where central banks are subject to political pressure, including hyperinflation,” she added.
In Asian trading, the US dollar broke above ￥110 for the first time since June, while the euro sank against the greenback to levels not seen in 12 months.
Among emerging market currencies, the won fell 0.6 percent, the rupiah shed 0.3 percent and the peso fell 1.3 percent.
The ringgit was off 0.4 percent at a 10-month low.
An official yesterday said that the Malaysian central bank is intervening in markets to support the beleaguered unit, which has lost 5 percent since last week’s US election result.
Other high-yielding currencies also tumbled, with the Canadian, New Zealand and Australian dollars each off 1 percent.
In equities trading Tokyo ended 0.6 percent higher with exporters lifted by the weaker yen.
Hong Kong added 0.1 percent in the afternoon and Sydney climbed 0.4 percent, but Shanghai fell 0.5 percent while Jakarta, Kuala Lumpur, Bangkok and Mumbai were all lower.
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