HONG KONG: The dollar held its gains against most other currencies in Asia on Friday following the Federal Reserve’s interest rate call, while the unit’s surge against the yen provided fresh impetus to Japanese stocks.
The US central bank’s hike Wednesday and its indication of three more next year—instead of the expected two—has lit a fire under the greenback, sending it to 14-year highs against the euro, with analysts saying it could soon hit parity.
The dollar has been on a roll since Donald Trump was elected president on November 8, promising huge spending on infrastructure, tax cuts and deregulation. That has also sent US equity markets to record highs this month.
However, the prospect of higher borrowing costs has rattled trading floors in Asia, with emerging market stocks and currencies suffering as dealers pull out looking for better returns in the US, where 10-year Treasury yields are at two-year highs.
In afternoon trade, the euro was at $1.0436, having fallen to $1.0367 in New York, its lowest level since early 2003 and heading towards the $1.00 mark for the first time since 2002.
“While the parity party invitations remain on hold, the writing is all but on the wall for the euro to succumb to the surging dollar,” Stephen Innes, senior trader at OANDA, said in a commentary.
He added the first quarter of 2017 was shaping up to be a “political hotbed” with the fallout from Brexit continuing and a “wave of highly contentious elections”.
The dollar held above 118 yen, at a 10-month high, while it also pushed on against other regional currencies. The Australian dollar fell 0.4 percent, South Korea’s won dropped 0.5 percent and Indonesia’s rupiah was off 0.2 percent.
However, the Mexican peso jumped 1.7 percent after the country’s central bank lifted interest rates for the second time in a month in response to the Fed move.
The unit hit a record low against the greenback after the win for Trump, who campaigned on a pledge to renegotiate a US-Mexico-Canada trade deal, curb remittances sent by migrants and build a giant border wall.
The yen’s retreat—it has lost almost a fifth of its value since Trump’s election—has sent Tokyo’s Nikkei index to one-year highs and on Friday chalked up a ninth successive gain, adding 0.7 percent. The index has risen six percent since December 5.
Despite those gains, Nintendo ended down more than four percent hours after it released its latest mobile game Super Mario Run.
Analysts pinned the blame on profit-taking—having surged almost 12 percent between September and
Thursday’s close—and worries its price tag may hurt sales, despite the app topping download charts.
DeNA, Nintendo’s co-developer on the game, plunged nearly seven percent.
Other regional markets were mostly up after suffering hefty losses on Thursday. Shanghai ended 0.2 percent higher and Seoul added 0.3 percent. But Sydney eased 0.1 percent and Hong Kong slipped 0.2 percent.
However, among emerging markets there were losses in Manila, Taipei, Jakarta and Kuala Lumpur.
In early European trade London and Frankfurt were both flat while Paris dipped 0.1 percent.