Dollar falls in Asia as Fed rate hikes seen as gradual

The dollar eased from seven-month highs against the euro Thursday as risk appetite was boosted by an upbeat outlook in the US economy and dealers bet an expected Federal Reserve interest rate hike will be slow.

The dollar also weakened against the yen after the Bank of Japan decided against ramping up its stimulus programme despite the country’s economy falling into recession.

Minutes from the Fed’s October policy meeting showed board members confident the world’s biggest economy could withstand a rise next month as their concerns about the global outlook ease.

The positive reading boosted regional markets with equities rallying Thursday after a surge on Wall Street, while emerging market currencies were lifted by a more confident view of riskier, higher-yielding, assets.

“If the Fed is successful in convincing investors that the up(ward) move in rates will be very gradual, it would be less favourable for the dollar, particularly against risk currencies which will benefit from the tailwind from accommodation elsewhere,” Todd Elmer, a Singapore-based currency strategist at Citigroup Inc, told Bloomberg News.

On Thursday, the euro rose to $1.0681 from $1.0660 Wednesday in New York, while the greenback dropped to 123.30 yen from 123.59 yen.

“Most participants” at the US central bank’s policy meeting expected rate lift-off conditions to be right by their next meeting, having broadly dropped their worries about the global economy and recent market turmoil, the Fed’s minutes said.

Among emerging currencies the Australian dollar rose 0.69 percent against the greenback, while South Korea’s won gained 0.90 percent and the Malaysian ringgit added 1.17 percent.

The New Zealand dollar tacked on 0.91 percent, the Indonesian rupiah advanced 0.44 percent and the Thai baht traded 0.12 percent higher. The Singapore and Taiwan dollars were also up against the US unit.