The US dollar trimmed a weekly advance that was spurred by prospects of higher US interest rates. US stocks rallied to a record.
The Bloomberg Dollar Spot Index fell from the highest level in more than a decade, while emerging market currencies clawed back gains after India’s rupee fell to a record-low on Thursday. All four major US equity benchmarks reached all-time highs as trading resumed following the Thanksgiving holiday.
Strong economic data and the prospect of increased spending after Republican candidate Donald Trump won the Nov. 8 US presidential vote have fueled a surge in bets on rate hikes by the US Federal Reserve, propelling the greenback higher against all but two of it peers this month.
Photo: EPA
Traders see an increase in borrowing costs next month as a certainty, while the odds of additional moves by June have risen to more than 60 percent, according to futures data tracked by Bloomberg.
“The dollar bull run had perhaps become a little stretched,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd in London. “We’ve had a very strong run since the election and it’s just a bit of a pullback.”
The Bloomberg Dollar Spot Index fell 0.2 percent at 4pm in New York.
In Taipei, the US dollar gained NT$0.015 to close at NT$31.942 against the New Taiwan dollar, after moving in a quiet session at a time when many foreign traders were away for the Thanksgiving holiday, dealers said.
For the week, the US dollar rose about 0.21 percent against the NT dollar.
Buying in the US dollar reflected expectations of a Fed rate hike by the Federal Reserve, dealers said.
However, the greenback’s strength was compromised as foreign institutional investors shifted to the buy side in the local equity market, the dealers said.
Taiwan Stock Exchange data showed that foreign institutional investors net bought NT$597 million of shares on Friday after a net sell of NT$3.85 billion seen a session earlier.
The yen posted the worst weekly performance among major currencies. The greenback has surged about 10 percent since Nov. 4 to an eight-month high against the Japanese currency.
“As long as the [economic] data flow continues to be relatively robust and strong, it gives support to the thesis that the [US] dollar will lead in terms of resilience in the economy, in terms of policy leadership,” Claudio Piron, Bank of America Corp’s cohead of Asia currency and rates strategy in Singapore, said in a Bloomberg Television interview. “Looking at our positioning data as well, it still seems to us that we are having flows continuing to build into the [US] dollar.”
The US dollar weakened 0.4 percent to ￥112.92 as of 7:23am in New York, halting a three-day advance. It reached ￥113.90 earlier, the highest since March 15.
While the greenback paused after its recent rally, there is room for the currency to advance further against the yen if the difference between the nations’ bond yields, less inflation, is an indicator, said Kit Juckes, a global strategist at Societe Generale SA in London.
“Dollar-yen will follow real yields, as long as Japanese ones don’t rise faster and as long as global sentiment holds,” Juckes said. “Our target is ￥120 next year.”
The rupee strengthened after sinking to a record low on Thursday. The Chinese yuan, which fell to an eight-year low this week, was little changed.
South Africa’s rand pared gains after the nation moved closer to a junk credit rating as Fitch Ratings Ltd changed the outlook on its assessment to negative from stable.
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