Dollar aided by Japanese reassurance
The US dollar strengthened in European morning trade on Friday, continuing its bounceback from weakness in the wake of Wednesday’s disappointing balance of payments data.
The dollar was aided by comments from both Japan and South Korea that they had no plans to alter the currency composition of their foreign exchange reserves. The duo hold more than $1,000bn of reserves between them, the vast majority of which is held in dollar assets.
The greenback drew further support from comments by Wolfgang Clement, the German economy minister, who warned that “exchange rate developments”, alongside rising oil prices, were creating problems for the German economy.
Eurozone politicians have been remarkably silent about the strength of the euro against the dollar in recent months, having been vocal on the subject for much of last year. Any pick-up in verbal intervention could damp expectations that the European Central Bank is edging towards a rate hike, thereby pulling any semblance of yield support away from the euro.
The dollar firmed 0.6c to $1.3316 against the euro on Friday, as well as adding 0.8c to $1.9168 against sterling and Y0.35 at Y104.85 against the yen, as Japanese importers were probably hedging their dollar exposure further out than usual to take advantage of the yield gap between the US and Japan, with three-month rates now at their widest since September 2001.
The greenback also made headway against the high-yielding Australian and New Zealand dollar, strengthening 0.3c to $0.7902 and 0.3c to $0.7392 respectively. The antipodean duo have largely escaped unscathed from a modest liquidation of US dollar-funded carry trades in the last 10 days, sparked by a rise in US Treasury yields that makes borrowing in the US more expensive and erodes the yield differential of high-yielding currencies.
However, several of the emerging market currencies that have suffered in the sell-off held onto the gains they made in a partial rebound in the second half of Thursday’s trade. The Brazilian real traded at R$2.7185 to the dollar, with the Turkish lira at TL1.314 and the South African rand at R6.0665. The Polish zloty firmed to 4.0605 zlotys to the euro while the Hungarian forint held steady at Ft245.68.
The dollar was aided by comments from both Japan and South Korea that they had no plans to alter the currency composition of their foreign exchange reserves. The duo hold more than $1,000bn of reserves between them, the vast majority of which is held in dollar assets.
The greenback drew further support from comments by Wolfgang Clement, the German economy minister, who warned that “exchange rate developments”, alongside rising oil prices, were creating problems for the German economy.
Eurozone politicians have been remarkably silent about the strength of the euro against the dollar in recent months, having been vocal on the subject for much of last year. Any pick-up in verbal intervention could damp expectations that the European Central Bank is edging towards a rate hike, thereby pulling any semblance of yield support away from the euro.
The dollar firmed 0.6c to $1.3316 against the euro on Friday, as well as adding 0.8c to $1.9168 against sterling and Y0.35 at Y104.85 against the yen, as Japanese importers were probably hedging their dollar exposure further out than usual to take advantage of the yield gap between the US and Japan, with three-month rates now at their widest since September 2001.
The greenback also made headway against the high-yielding Australian and New Zealand dollar, strengthening 0.3c to $0.7902 and 0.3c to $0.7392 respectively. The antipodean duo have largely escaped unscathed from a modest liquidation of US dollar-funded carry trades in the last 10 days, sparked by a rise in US Treasury yields that makes borrowing in the US more expensive and erodes the yield differential of high-yielding currencies.
However, several of the emerging market currencies that have suffered in the sell-off held onto the gains they made in a partial rebound in the second half of Thursday’s trade. The Brazilian real traded at R$2.7185 to the dollar, with the Turkish lira at TL1.314 and the South African rand at R6.0665. The Polish zloty firmed to 4.0605 zlotys to the euro while the Hungarian forint held steady at Ft245.68.
posted by Drs Search @ 10:22 AM
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