HONG KONG: The dollar climbed further against emerging currencies Friday while most Asian stock markets retreated after Federal Reserve boss Janet Yellen said she expects a
US interest rate hike by the year’s end.
Yellen’s comments were the first since last Thursday when she rattled nerves by saying the Fed had held rates because of worries about the impact on the US economy of a growth crisis in China and other developing nations.
But while economists said the speech provided a little more clarity on the central bank’s timetable for normalizing monetary policy, the prospect of higher borrowing costs will dent investment opportunities, weighing on stocks.
The yen ticked higher despite consumer prices falling for the first time in two years and a pledge by Japanese Prime Minister Shinzo Abe for a fresh drive to boost the economy.
The increased likelihood of a rate rise sent the dollar higher as investors look to shift out of emerging markets to find better and safer return in the United States.
South Korea’s won lost 0.46 percent, the Indonesia rupiah eased 0.12 percent and the Malaysian ringgit was down 0.40 percent.
The resources-reliant Australian dollar — already under pressure owing to China’s weakness — fell 0.36 percent.
Regional markets also retreated, with Hong Kong down 0.33 percent, Shanghai 0.76 percent down and Tokyo shedding 0.06 percent. Sydney was 0.50 percent off and Seoul eased 0.78 percent.
Fears that a US rise will fuel fresh turmoil on world markets increased demand for safe-haven assets, pushing the yen higher.
In morning trade the dollar eased to 120.10 yen from 129.29 yen in New York, while the euro was at 134.33 yen from 134.36 yen.
It took another blow Friday when data showed prices slipped in August for the first time since April 2013 — highlighting the job authorities have in ending years of deflation. It will also put fresh pressure on the Bank of Japan to ramp up its already huge stimulus program.
Marcel Thieliant from Capital Economics said in a commentary: “A sluggish economic recovery and anaemic wage growth suggest that price pressures are unlikely to strengthen much further form here on.”