Asian markets headed into the weekend on a positive note yesterday, with Tokyo again propelled by the weaker yen but the dollar edged back slightly in the afternoon following its recent surge against global currencies.
With traders confident the Federal Reserve will hike interest rates before Christmas, the dollar is cruising along, hitting record highs against India’s rupee and the Turkish lira and touching multi-month highs elsewhere.
The advance has come hand in hand with a rally across world markets since Donald Trump’s shock election win, with dealers expecting his big spending, high tax plans will give a boost to the world’s top economy.
However, there are some concerns inside emerging market governments about his campaign pledge to review global trade deals, which could lead to an era of protectionism and throw up huge US tariffs.
“There’s this anticipation of the US raising rates that is a positive signal that the US economy is strong and that’ll keep pushing additional inflows into the dollar,” Niv Dagan, executive director at Peak Asset Management, told Bloomberg News.
“The fact that there are outflows out of emerging markets, like the Philippines, places a lot of pressure on their equity markets and we’ll continue to see that stronger dollar as a negative.”
In Asian morning trade the dollar flirted with the ¥114 mark for the first time since March, providing more support for Japan’s exporters, before it eased back slightly.
The Nikkei came off earlier highs but ended 0.3% up, its seventh straight win.
Another weak reading on Japanese consumer prices meant any monetary tightening by the central bank was unlikely in the foreseeable future.
The greenback dipped slightly against many other currencies, although it still remains elevated.
Stephen Innes, a senior trader at OANDA in Singapore, said: “Price action suggests markets still under positioned dollar, as any sell-offs are shallow and running into a wall of buyers.”
Among regional currencies, South Korea’s won, the Indonesian rupiah, Malaysia’s ringgit and the Thai baht were all stronger but still sitting near multi-month lows as traders drag their cash out to seek better returns in the US.
Nicholas Teo, a strategist at KGI Fraser Securities in Singapore, said: “The dollar has been really strong in anticipation of Yellen’s move next month and that strength in the US dollar is ultimately going to mean that emerging market assets would be seen as disadvantaged.”
In other stock markets, Hong Kong closed up 0.5%, Shanghai gained 0.6%, Sydney added 0.4% and Seoul put on 0.2% while Singapore jumped 0.8%.
There were also gains in Wellington, Taipei, Manila and Bangkok.
In early European trade London rose 0.2% while Paris and Frankfurt were flat.
In Tokyo, the Nikkei 225 up 0.3% at 18,381.22 points; Hong Kong – Hang Seng up 0.5% at 22,723.45 points and Shanghai – Composite up 0.6% at 3,261.94 points at the close yesterday.
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