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US dollar rally fizzles, dealers await China release
[HONG KONG] The dollar edged down in Asia on Wednesday after rallying since last week's US jobs data while Asian equities mostly dipped as investors nervously await there release of more Chinese economic data.
Another run of disappointing figures out of Beijing this week, on trade and inflation, has reinforced worries about China's outlook. And Wednesday's readings will be pored over for further clues about the world's number two economy, a key driver of global growth.
Despite ongoing weaknesses in global economy, particularly in China, the Federal Reserve has been widely tipped to hike borrowing rates as it looks to prevent bubbles appearing at home.
Friday's bumper US jobs report ramped up speculation that central bank policymakers will announce a lift-off before the end of the year, which sent the dollar surging on Friday and Monday.
However, Masato Yanagiya, head of foreign-exchange and money trading at Sumitomo Mitsui Banking Corp. in New York, said the Fed would likely be studying world markets before making its decision.
"The wild card to the otherwise straight road to a rate hike is stock moves," Yanagiya told Bloomberg News.
"Tumbling stocks would overhaul the scenario of a Fed rate hike and dollar buying. The Fed may not like stock declines and in that sense, it now depends on markets not data."
On Wednesday the greenback dipped against the euro after hitting a six-month high in New York trade. Adding to selling pressure on the single currency are expectations the European Central Bank will further loosen its own monetary policy to try to kickstart the eurozone's torpid economy.
The euro was at US$1.0732 early Wednesday in Tokyo, from US$1.0727 in New York, where it at one point touched US$1.0675, its lowest level since late April.
The dollar also edged down to 123.04 yen from 123.19 yen.
Emerging market currencies also strengthened slightly for a second day, having been hammered at the start of the week.
Malaysia's ringgit, the Indonesian rupiah and South Korean won were the main winners after being hurt the most on Monday. There were also gains for the Australian and Singapore dollars, as well as the Thai baht.
On equities markets dealers were keeping to the sidelines before Beijing announces data on investment, retail sales and factory output.
Months of weak readings have put pressure on Beijing to act as it struggles to transform the nation's growth model to a more stable one driven by domestic consumption and away from decades of export reliance and state investment.
Economic growth continues to slow - at annual levels not seen in a quarter of a century - despite moves to boost lending, including six interest rate cuts in 12 months and several reductions in the amount of cash banks must keep in reserve.
Attention will also be paid to retailers Wednesday in China as it marks Singles' Day, which has become the world's biggest shopping day that sees billions spent by the country's cashed up consumers.