Dollar wins support from US rate rise hopes

The dollar edged up against most currencies in Asia trade Friday after Federal Reserve chair Janet Yellen said she expects to hike US interest rates before the year is over.

Yellen’s comments Thursday were the first since she rattled nerves last week by saying the Fed had held rates because of worries about a slowdown China and other developing nations hurting the world’s top economy.

The increased likelihood of a rate rise saw investors move into the greenback from emerging market currencies as they look for better returns in the United States.

The Indian rupee fell 0.25 percent, the Korean won shed 0.16 percent, Malaysia’s ringgit was 0.13 percent lower and the Singapore dollar gave up 0.11 percent. However, the Indonesian rupiah and Thai baht edged slightly higher after a recent string of losses.

“Yellen’s words continue to support bets for a stronger dollar,” Jeon Seung Ji, a currency analyst at Samsung Futures in Seoul, told Bloomberg News.

The US unit also advanced against other major currencies, buying 120.48 yen from 120.29 yen Thursday in New York, while the euro was at $1.1157 and 134.41 yen compared with $1.1172 and 134.36 yen.

The yen gave up early gains after data showed Japanese consumer prices fell for the first time in more than two years in August.

The news comes as a blow to Prime Minister Shinzo Abe’s plans to put a fire under Japan’s economy after years of falling or stagnant prices and tepid growth.

Analysts said the figures will also put pressure on the Japanese central bank to increase its already massive bond-buying scheme that attempts to pump cash into the economy, which would likely further weaken the yen.

Marcel Thieliant from Capital Economics speculated that Bank of Japan will announce an expansion to its record 80 trillion yen ($665 billion) annual asset-buying scheme at its end of October meeting.

“A sluggish economic recovery and anaemic wage growth suggest that price pressures are unlikely to strengthen much further form here on,” he said in a commentary.