Dollar rises on US rate bets, Asia markets struggle
US markets rallied Monday on the back of another upbeat round of corporate earnings and a provisional reading that showed activity in the US manufacturing sector expanded at a faster rate than expected.
That came as St. Louis Federal Reserve President James Bullard said December was “most likely” the best time for a tightening of borrowing costs. And Fed Bank of Chicago President Charles Evans said he saw three hikes by the end of next year.
“Bullard did not mince words and explicitly gave the green light for a December lift-off, but suggested that the longer term rate cycle is much lower,” Stephen Innes, a senior trader at OANDA, said in a note.
The Fed meets next month but is expected to stand pat as that comes just days before the presidential election.
In afternoon Asian trade, the dollar bought 104.47 yen, up from 104.21 yen in New York, while the pound also retreated against the US unit and the euro was virtually unchanged.
Most other Asia-Pacific currencies also weakened, with the South Korean won down 0.3 percent and Australian dollar 0.1 percent off.
The Canadian dollar was also down on expectations that a free-trade deal with the EU was on the verge of collapse despite seven years of talks.
The weaker yen provided further support to Japan’s exporters, lifting the Nikkei 0.6 percent to a six-month high.
Shares in Kyushu Railway surged 15 percent as the former state-owned firm made its Tokyo trading debut after this year’s third biggest initial public offering, worth $4.0 billion.
“With the US economy looking solid and a rate hike by year-end looming in investors’ minds, the yen is weakening, and boosting expectations for a recovery in earnings in the second half of the year,” Toshihiko Matsuno, a senior strategist at SMBC Friend Securities Co. in Tokyo, told Bloomberg News.
Among other markets Sydney rose 0.6 percent, Shanghai added 0.1 percent and Singapore was slightly higher in late trade. There were also positive finishes in Wellington and Taipei.
But Hong Kong lost 0.1 percent in the afternoon and Seoul ended down 0.5 percent.
Oil traders were moving uneasily on worries about an agreed output cut by OPEC and Russia, with comments from Iraq’s oil minister that it should be exempt fuelling concerns over whether the deal can be implemented.
– Key figures around 0700 GMT –
Tokyo – Nikkei 225: UP 0.8 percent at 17,365.25 (close)
Hong Kong – Hang Seng: DOWN 0.1 percent at 23,577.96
Shanghai – Composite: UP 0.1 percent at 3,131.94 (close)
Euro/dollar: DOWN at $1.0876 from $1.0877 Friday
Dollar/yen: UP at 104.47 yen from 104.21 yen
Pound/dollar: DOWN at $1.2221 from $1.2239
Euro/pound: UP at 88.99 pence from 88.87 pence
Oil – West Texas Intermediate: DOWN flat at $50.42 a barrel
Oil – Brent North Sea: DOWN nine cents at $51.37 a barrel
New York – Dow: UP 0.4 percent at 18,233.03 (close)
London – FTSE 100: DOWN 0.5 percent at 6,986.40 (close)
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