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Dollar strengthens on China worries
[TOKYO] The dollar rose against emerging currencies on Tuesday on renewed fears about a slowdown in the global economy and following comments from a top Federal Reserve official suggesting a US interest rate hike could still come this year.
Official Chinese figures Monday showed the world's number two economy grew at its slowest pace in six years in July-September, although slightly quicker than expected.
While not as bad as forecast, the figures helped sow doubt on trading floors, sapping confidence that has helped higher-risk assets such as the Indonesian rupiah and Malaysian ringgit rally this month.
Analysts warned the recent gains - fuelled by hopes of fresh Chinese stimulus and a delay to a US rate rise - may have run their course.
Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, said in an email to clients: "The three-week recovery is approaching an exhaustion point." "The key question for investors is how much can growth accelerate in the December quarter and will there be more policy stimulus. The answer to both questions is - not a lot," he said.
The renewed concerns about the global outlook have pushed investors into lower-yielding and less risky currencies such as the dollar and the yen.
The greenback got extra support after Federal Reserve Bank of San Francisco president John Williams said the central bank is close to achieving its mandate of stable prices and maximum employment and should increase borrowing costs "in the near future".
The rupiah shed 0.93 per cent on Tuesday and the ringgit lost 0.76 per cent while the won fell 0.64 per cent. The Taiwan and Singapore dollars were also marginally lower.
The dollar traded at 119.46 yen compared with 119.50 yen Monday in New York.
With a European Central Bank policy meeting this week, attention will be on whether it announces any further easing of monetary policy to kickstart the stuttering eurozone economy.
With expectations it will soon widen its already vast bond-buying scheme, the euro has fallen against the dollar for most of the past week.
However, it ticked up to US$1.1334 from US$1.1322 Tuesday, while it also gained to 135.45 yen from 135.30 yen.
"The ECB will certainly keep talking about the prospect as well as readiness and willingness to ease further if necessary," said Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand.
"That's been quite an effective tactic of keeping euro capped."