Dol­lar hits new high, Dow sets sights on 20,000

Kuwait Times - - BUSINESS -

LON­DON: The dol­lar hit a 14-year high yes­ter­day as the yen fell af­ter the Bank of Ja­pan stuck to its ul­tra-loose mone­tary pol­icy and the euro weak­ened fol­low­ing deadly at­tacks in Ger­many and Turkey.

On Wall Street, the Dow ap­peared set for an­other run at 20,000 points, as con­cern af­ter the at­tacks in Europe were off­set by re­as­sur­ance over Italy’s plan to spend up to 20 bil­lion eu­ros ($21 bil­lion) to res­cue its trou­bled banks. On cur­rency mar­kets, a sense of cau­tion af­ter a truck ploughed into a Christmas mar­ket in Ber­lin, killing 12, sent the safe­haven Swiss franc to­wards a six-month high ver­sus the euro and pushed the com­mon cur­rency firmly back be­low $1.04.

But the dol­lar and ris­ing bond yields again dom­i­nated, af­ter the head of the Fed­eral Re­serve flagged the strength of the US jobs mar­ket in a speech to stu­dents on Mon­day. That sent the green­back up al­most half a per­cent against a bas­ket of ma­jor cur­ren­cies to 103.65, its strong­est since Jan­uary 2003. Its gains were strong­est against the yen, which slid around 1 per­cent af­ter the Bank of Ja­pan, shrug­ging off the yen’s re­cent slump, said it would keep mone­tary pol­icy loose.

“The big­gest im­pact you see from the at­tacks in Ber­lin and (Ankara) is the Swiss franc/euro,” said So­ci­ete Gen­erale FX strate­gist Alvin Tan. “But apart from that the dol­lar con­tin­ues to be strong af­ter we had some rather pos­i­tive com­ments from Janet Yellen.”

Bench­mark 10-year US gov­ern­ment bond yields, which set the bar for global bor­row­ing costs and have been ris­ing hand-in-hand with the dol­lar over the last few months, were at 2.57 per­cent hav­ing ear­lier topped 2.58 per­cent. The green­back has risen 12 per­cent ver­sus the yen since Don­ald Trump’s sur­prise pres­i­den­tial elec­tion vic­tory, on his prom­ises of in­creased fis­cal stim­u­lus. The win was made of­fi­cial on Mon­day af­ter he got the re­quired Elec­toral Col­lege votes.

Fun­da­men­tals

Mod­est 0.3 per­cent gains for Euro­pean shares came af­ter MSCI’s broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan had ended down 0.3 per­cent due fifth straight day of losses for emerg­ing mar­kets stocks. China’s CSI 300 in­dex slid 0.6 per­cent, on Beijing’s move to tighten su­per­vi­sion of shadow bank­ing ac­tiv­i­ties and on liq­uid­ity con­cerns, while Ja­pan’s Nikkei closed up 0.5 per­cent af­ter a late BOJ-linked rally.

“There was no par­tic­u­lar sur­prise from the pol­icy meet­ing, but in­vestors are happy that the econ­omy’s fun­da­men­tals are fi­nally ris­ing af­ter the BOJ ex­pressed an up­beat view,” said Takuya Taka­hashi, a strate­gist at Daiwa Se­cu­ri­ties. Wall Street was ex­pected to nudge higher hav­ing tailed off slightly on Mon­day as risk aver­sion set in fol­low­ing the deaths in Ger­many, the shoot­ing dead of Rus­sia’s am­bas­sador in Turkey, and a gun attack in a mosque in Switzer­land.

Chan­cel­lor An­gela Merkel said of the attack in Ber­lin: “There is much we still do not know with suf­fi­cient cer­tainty but we must, as things stand now, as­sume it was a ter­ror­ist attack.”

The lira ini­tially ral­lied on re­lief that Moscow and Ankara struck a uni­fied tone af­ter the Ankara attack, but took a dive af­ter the coun­try’s cen­tral bank un­ex­pect­edly kept in­ter­est rates on hold hav­ing been widely fore­cast to raise them. The cur­rency has lost 17 per­cent of its value against the dol­lar this year, hit by in­vestor con­cerns about a crack­down by author­i­ties in the af­ter­math of a failed coup in July and by a resur­gent dol­lar fol­low­ing Don­ald Trump’s US elec­tion win.

The rou­ble though was up at 61.6554 per dol­lar and safe haven gold, which rose 0.4 per­cent on Mon­day, pulled back 0.7 per­cent to $1,130 an ounce, as the prospect of fur­ther US rate hikes out­weighed po­lit­i­cal con­cerns.

Asian mar­kets closed mixed. Ja­pan’s Nikkei 225 clocked an­other fresh high for the year, ad­vanc­ing 0.5 per­cent to 19,494.53, while South Korea’s Kospi added 0.2 per­cent to 2,041.94. But Hong Kong’s Hang Seng in­dex fell 0.5 per­cent to 21,729.06 and the Shang­hai Com­pos­ite In­dex in main­land China dropped 0.5 per­cent to 3,102.88. The S&P/ASX 200 in Aus­tralia gained 0.5 per­cent to 5,591.10.

Hong Kong closed down 0.5 per­cent and Shang­hai also ended down 0.5 per­cent, with main­land Chi­nese in­vestors fret­ting over a weak­en­ing yuan and ris­ing bond yields. Manila shed 1.6 per­cent, Jakarta fell 0.3 per­cent and Kuala Lumpur lost 0.2 per­cent while Bangkok and Mum­bai were also well down. How­ever, Tokyo ended 0.5 per­cent higher af­ter the Bank of Ja­pan held fire on its stim­u­lus but gave an up­beat view of the world’s num­ber-three econ­omy as ex­ports pick up on the back of a weaker yen. The Nikkei had fallen slightly Mon­day af­ter a nine-day rally. Syd­ney added 0.5 per­cent and Seoul gained 0.2 per­cent, while Taipei and Welling­ton were flat.

The yen has fallen more than 17 per­cent against the green­back since Trump’s shock US pres­i­den­tial elec­tion win in Novem­ber fanned spec­u­la­tion that his plans for big gov­ern­ment spend­ing and tax cuts would force the Fed­eral Re­serve to raise bor­row­ing costs. — Agen­cies

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