Dol­lar near 3-m high

Kuwait Times - - BUSINESS -


The dol­lar hov­ered near a 3-1/2-month high ver­sus the yen yes­ter­day, af­ter mak­ing big gains overnight as the markets pre­pared for a Don­ald Trump pres­i­dency that could stim­u­late the US econ­omy fis­cally and lift in­ter­est rates. The US cur­rency dipped slightly to 106.610 yen af­ter surg­ing to 106.950 yen overnight, its high­est since July 21. The green­back was set to end the week with a 3.3 per­cent gain against its Ja­panese peer, which was ini­tially ex­pected to emerge on the win­ning end due to its per­ceived safe-haven sta­tus upon a Trump vic­tory in the US pres­i­den­tial elec­tions.

The fast pace of the dol­lar’s ap­pre­ci­a­tion against the yen prompted a re­sponse from Ja­pan’s Fi­nance Min­is­ter Taro Aso, usu­ally known to make state­ments when the cur­rency pair moves in the op­po­site di­rec­tion. “It is ex­cep­tional for the yen to move 5 yen (against the dol­lar) in two days,” he told re­porters, stress­ing the im­por­tance of mar­ket sta­bil­ity.

The dol­lar had slumped briefly to­wards 101 yen on Wed­nes­day when the Repub­li­can can­di­date, feared by the markets as an un­known en­tity, edged out Demo­crat Hil­lary Clin­ton. But the cur­rency has ral­lied hard since, along with an ebb in broader risk aver­sion ac­com­pa­nied by a surge in US yields amid ex­pec­ta­tions that Trump’s poli­cies would boost spend­ing and in­fla­tion.

“The 20 to 30 ba­sis jump in Trea­sury yields has been the biggest booster for the dol­lar. It’s been eu­pho­ria in the mar­ket over the past few days, al­though dol­lar/yen might have a tough time crack­ing 107 for now fol­low­ing fi­nance min­is­ter Aso’s com­ments,” said Ayako Sera, se­nior mar­ket econ­o­mist at Su­mit­omo Mit­sui Trust.

She added the dol­lar has also drawn sup­port as ex­pec­ta­tions that the Fed­eral Re­serve may not hike in­ter­est rates in De­cem­ber fol­low­ing a Trump win has dis­si­pated. Trump’s plans call for mas­sive tax cuts and in­fras­truc­ture build­ing which could in­crease the US bud­get deficit. US long-dated Trea­sury yields have duly risen to their high­est in more than 10 months. “Should the US re­fla­tion trade gain trac­tion and longer dated US Trea­sury yields move higher in an or­derly man­ner (po­ten­tially ac­com­pa­nied by tighter Fed pol­icy), this is likely to send dol­lar/yen higher,” wrote cur­rency strate­gists at ING.

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