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Dollar takes a hit on global growth jitters

21 August 2015 06:30 pm - 0     - {{hitsCtrl.values.hits}}

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The dollar was under pressure against the yen and euro yesterday as confidence in the global economy headed south and hopes for a September US interest rate hike faded.

The greenback slipped to 123.02 yen, down from 123.38 yen in New York and well down from rates above the 124 yen level seen earlier Thursday in Tokyo.

The euro also benefited from market jitters, with the 19-nation unit quoted at $1.1279 and 138.74 yen, up from $1.1241 and $138.69 US trading.

“The euro may be gaining more than other currencies from the reduction in expectations of Fed tightening,” said Sean Callow, a strategist at Westpac Banking, after minutes from the US Federal Reserve’s last meeting published this week dampened hopes for an imminent rate rise.

Market sentiment has dived as concerns about the global economy soared making the yen, seen as a safe-haven in times of uncertainty or turmoil, more attractive.

That slump in confidence is largely tied to uncertainty over China, the world’s number two economy, after the shock devaluation of the yuan last week added to fears that growth is slowing more than thought.

Japanese Finance Minister Taro Aso yesterday cautioned over the devaluations and any future manipulation of exchange rates, saying Tokyo would face a “difficult” task in responding if such moves became frequent, without elaborating.

But Aso said the cut was positive if Beijing was moving to make its currency subject to a “market-oriented system”.

Stoking economic concerns, an independent survey on Friday showed Chinese manufacturing activity slumped to a 77-month low in August, while plunging oil prices also weighed on investor sentiment.

The US Federal Reserve cited China as a red flag for global growth in minutes of its last meeting, which lowered expectations the central bank could lift rates as early as next month. A rate rise would be a plus for the dollar.

Investors were also keeping an eye on Greece, where Prime Minister Alexis Tsipras announced his resignation and called for snap elections, as he went on the offensive to defend the country’s massive bailout after it triggered a rebellion within his own hard-left party.

In other trading, the dollar was mostly higher against other Asia-Pacific currencies, which have taken a beating since the yuan devaluation.
It strengthened to 46.79 Philippine pesos from 46.34 pesos on Thursday, to 1,194.82 South Korean won from 1,185.17 won, and to 13,936 Indonesian rupiah from 13,845 rupiah.

The dollar also rose to Sg$1.4087 from Sg$1.4026, to 65.82 Indian rupees from 65.19 rupees, and to Tw$32.72 from Tw$32.47.

The Thai baht weakened to a fresh six-year low of 35.70 against the dollar from 35.54 a day before, as the deadly bombing in Bangkok threatens Thailand’s crucial tourism industry.

The Australian dollar slipped to 73.05 US cents from 73.45 cents, while the Chinese yuan fetched 19.19 yen against 19.36 yen. -AFP
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