The US dollar headed for its first weekly advance against the yen in five and rose versus the euro as declines in emerging-market stocks and bonds prompted some investors to seek the safety of US Treasuries.
Stock markets in countries including Egypt, Poland and Peru fell after the US 10-year yield climbed to a seven-month high this week. The Federal Reserve next week will probably lift interest rates for a seventh time since June, boosting the return on dollar-based deposits.
"When you get emerging markets under pressure, money tends to flow back into dollars," said Ian Gunner, head of currency research in London at Mellon Financial Corp, which oversees about US$700 billion in assets. "There is always some residual support for the currency."
The dollar rose to ?104.78 as of midafternoon in Tokyo.
It was at US$1.3356 per euro, from US$1.3378. The US currency is up 0.8 percent against the yen and 0.7 percent versus the euro on the week.
Emerging-market stocks fell yesterday, with Egypt's CASE 30 Index leading declines, sinking 6.3 percent. The CECE Traded Index of 25 companies in Poland, Hungary and the Czech Republic slid 1.5 percent to 1,624.62, erasing six weeks of gains. The index has slipped 13 percent in six days, the longest streak of declines since the same period ending Oct. 27, 2003.
"Emerging markets have been whacked, and when people want to hunker down they still go to the US and the dollar," said David Mozina, Sydney-based currency strategist at ABN Amro Holding NV. "The Fed's in the process of jacking up rates, and that should support the dollar."
The US currency may rise beyond US$1.33 per euro and ?105 in the next few days, Mozina said.
The margin by which the yield on US two-year debt exceeded similar maturity German bonds reached a four-year high of 131 basis points, or 1.31 percentage points, on March 15, before narrowing to 116 basis points.
The yield on the US benchmark 10-year note on March 14 traded at a seven-month high of 4.58 percent, increasing the attraction of US Treasuries. It has since fallen 11 basis points, or 0.11 percentage point, to 4.47 percent.
The Fed, which raised interest rates in quarter percentage- point increments six times since June, will do so again on March 22, according to the median estimate of 92 economists surveyed by Bloomberg News.
The Fed's benchmark rate target will reach 3.75 percent by Dec. 31, according to the median forecast of 66 economists polled by Bloomberg from March 1 to March 8.
The European Central Bank's comparable rate is 2 percent, while the Bank of Japan has kept borrowing costs near zero since March 2001.
"Rising US interest rates are finally coming to support the US dollar by enticing money back into the US," said Kenichiro Ikezawa, who manages US$1 billion in overseas debt at Daiwa SB Investments in Tokyo. "That's a classic phenomenon we normally see as the Fed raises interest rates, but had not been seen so much in this tightening cycle. It's dollar-positive."
The dollar may gain to US$1.325 per euro and ?105.50 next week, Ikezawa said.
Gains in the US currency may be limited over concerns the US will still fail to attract sufficient capital to offset its current account deficit. The shortfall in the current account was a record US$187.9 billion in the fourth quarter, the Commerce Department said two days ago. The news sent the dollar down more than US$0.01 on March 16, the only day this week it declined.
"The current account deficit is offsetting news about US growth and rising rates," said Callum Henderson, head of global currency strategy in Singapore at Standard Chartered Plc.
The US needs to attract more than US$2 billion a day in investments from abroad to compensate for the deficit and hold the dollar's value, according to Bloomberg calculations.
The yen also fell as oil traded near a record high, raising speculation it may stall economic growth in Japan, which imports almost all of its petroleum.
Japanese Finance Minister Sadakazu Tanigaki said the government "must closely watch oil prices because they affect the cost of various materials."
MAKING WAVES: China’s maritime militia could become a nontraditional threat in war, clogging up shipping lanes to prevent US or Japanese intervention, a report said About 1,900 Chinese ships flying flags of convenience and fishing vessels that participated in China’s military exercises around Taiwan last month and in January last year have been listed for monitoring, Coast Guard Administration (CGA) Deputy Director-General Hsieh Ching-chin (謝慶欽) said yesterday. Following amendments to the Commercial Port Act (商港法) and the Law of Ships (船舶法) last month, the CGA can designate possible berthing areas or deny ports of call for vessels suspected of loitering around areas where undersea cables can be accessed, Oceans Affairs Council Minister Kuan Bi-ling (管碧玲) said. The list of suspected ships, originally 300, had risen to about
DAREDEVIL: Honnold said it had always been a dream of his to climb Taipei 101, while a Netflix producer said the skyscraper was ‘a real icon of this country’ US climber Alex Honnold yesterday took on Taiwan’s tallest building, becoming the first person to scale Taipei 101 without a rope, harness or safety net. Hundreds of spectators gathered at the base of the 101-story skyscraper to watch Honnold, 40, embark on his daredevil feat, which was also broadcast live on Netflix. Dressed in a red T-shirt and yellow custom-made climbing shoes, Honnold swiftly moved up the southeast face of the glass and steel building. At one point, he stepped onto a platform midway up to wave down at fans and onlookers who were taking photos. People watching from inside
Japan’s strategic alliance with the US would collapse if Tokyo were to turn away from a conflict in Taiwan, Japanese Prime Minister Sanae Takaichi said yesterday, but distanced herself from previous comments that suggested a possible military response in such an event. Takaichi expressed her latest views on a nationally broadcast TV program late on Monday, where an opposition party leader criticized her for igniting tensions with China with the earlier remarks. Ties between Japan and China have sunk to the worst level in years after Takaichi said in November that a hypothetical Chinese attack on Taiwan could bring about a Japanese
STREAMLINED: The dedicated funding would allow the US to transfer equipment to Taiwan when needed and order upgraded replacements for stockpiles, a source said The US House of Representatives on Thursday passed a defense appropriations bill totaling US$838.7 billion, of which US$1 billion is to be allocated to reinforcing security cooperation with Taiwan and US$150 million to replace defense articles provided to the nation. These are part of the Consolidated Appropriation Act, which the US House yesterday passed with 341 votes in favor and 88 against. The act must be passed by the US Senate before Friday next week to avoid another government shutdown. The US House Committee on Appropriations on Monday unveiled the act, saying that it allocates US$1 billion for the Taiwan Security Cooperation Initiative
RSS