The US dollar climbed to the highest level in 10 months against the yen as its best run since 2014 showed little sign of abating.
The US currency has advanced every week since the election of Donald Trump as US president, and climbed through ¥115 on Friday, a level unseen since February.
The run of gains has mirrored a similar streak in US Treasury yields, as investors price in a faster path of interest rate hikes from the US Federal Reserve. The greenback has also rallied as US stock benchmarks set records.
Photo: EPA
“The market is looking for a stronger economy with fiscal stimulus, higher rates, and some easing of regulatory burdens, and that’s pushing up the dollar,” said Steven Englander, global head of G10 currency strategy in New York at Citigroup Inc, the world’s biggest foreign-exchange trader. “The fact that the market proved so resilient suggests that there’s latent desire to buy dollars.”
The US dollar was at ¥115.24 as of 4:56pm New York time, after touching ¥115.37, the strongest since Feb. 9.
The greenback has advanced 11 percent in the past five weeks, and has a 61 percent chance of touching ¥120 in the next six months, according to data compiled by Bloomberg based on options.
NT DOLLAR LAGS
In Taipei, the greenback rose against the New Taiwan dollar on Friday, gaining NT$0.108 to close at NT$31.860, as weakness in other regional currencies prompted traders to dispose of the local currency throughout the session, dealers said.
The US dollar’s gains were capped by foreign institutional buying in the local equity market, but the currency still moved higher to stop a three-session losing streak against the NT dollar.
According to the Taiwan Stock Exchange, net stock purchases by foreign institutional investors on Friday were NT$8.18 billion (US$257 million), compared with NT$12.59 billion the previous day.
The US dollar closed down about 0.2 percent against the local currency for the week.
The greenback opened at NT$31.830 and moved between NT$31.800 and NT$31.887 before the close. Turnover totaled US$655 million.
Market sentiment remained cautious ahead of a US Federal Reserve policymaking meeting next week, which kept turnover in the local market moderate, the dealers said.
EURO FALLS
Meanwhile, the euro dropped on Friday for a second consecutive day in a continued reaction to the European Central Bank’s (ECB) extending its bond-buying program longer than many had anticipated, even as the bank cut the size of the monthly purchases.
The ECB on Thursday said it would reduce its monthly asset buys from 80 billion euros (US$84.3 billion) to 60 billion euros starting in April, and extend purchases from March to December next year. It reserved the right to increase the size of purchases again.
Underlying its promise for extensive stimulus, the ECB predicted inflation at 1.7 percent in 2019, arguing that more-costly energy could boost consumer prices even without lifting the underlying trend.
“The extension of the program was longer than most had expected, and a lot of the language ... was pretty dovish,” said Erik Nelson, a currency analyst at Wells Fargo in New York.
“Inflation forecasts were pretty subdued all the way out to 2019 and growth forecasts were pretty low, and the risks are tilted to the downside,” he said.
The euro dropped to US$1.0528, its lowest level since Monday, and was last down 0.69 percent at US$1.0541.
The Fed is widely expected to raise interest rates for the first time this year when it meets next week, but it may take a cautious tone on the economy.
Traders will focus on the Fed’s economic projections, known colloquially as the dot plot, for indications of any change in expectations following Trump’s surprise election on Nov. 8.
Trump’s victory increased market expectations of greater fiscal stimulus that could boost economic growth and inflation.
“In the last three or four meetings, we’ve seen a continual marking down in the dot plot, so even if you see the officials maintain the current forecast, it could be viewed as mildly hawkish,” Nelson said.
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