US dollar holds gains on Fed call, Tokyo on for ninth win

[HONG KONG] The dollar reinforced its strength 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 on 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 US unit 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 early trade the euro was at US$1.0423, having fallen to US$1.0367 in New York, its lowest level since early 2003 and heading towards the US$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 119 yen, a 10-month high, while it also pushed on against other regional currencies. The Australian dollar fell 0.4 per cent, South Korea's won fell 0.5 per cent and Indonesia's rupiah was off 0.3 per cent.

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 it was heading for a ninth successive gain, adding 0.7 per cent by the break.

Despite those gains, Nintendo was down almost five per cent hours after it released its latest mobile game Super Mario Run.

The drop could be a sign that gamers - and investors - are disappointed by the effort, although profit-taking may also be at play as the fall comes after a sharp run-up in the shares prior to Thursday's release.

Other regional markets were also up after suffering hefty losses on Thursday. Hong Kong and Shanghai each added 0.1 per cent and Sydney put on 0.2 per cent while Seoul added 0.3 per cent.

However, among emerging markets there were losses in Manila, Jakarta and Kuala Lumpur.

AFP