US dollar rises on interest rate bets, Asia markets struggle

[HONG KONG] The US dollar rose in Asia on Tuesday as the chances of an interest rate hike were further boosted, but stock traders were unable to capitalise on a positive lead from Wall Street.

US markets rallied on Monday on the back of another upbeat round of corporate earnings and a provisional reading that showed activity in the US manufacturing sector expanded at a faster rate than expected.

That came as St Louis Federal Reserve President James Bullard said December was "most likely" the best time for a tightening of borrowing costs.

"Bullard did not mince words and explicitly gave the green light for a December lift-off, but suggested that the longer term rate cycle is much lower," Stephen Innes, a senior trader at Oanda, said in a note.

The Fed meets next month but is expected to stand pat as that comes just days before the presidential election.

In early Asian trade, the dollar bought 104.40 yen, up from 104.21 yen in New York, while the euro and pound also retreated against the US unit.

Most other Asia-Pacific currencies also weakened, with the South Korean won down 0.7 per cent and Australian dollar 0.3 per cent off.

The Canadian dollar was also down on expectations a free-trade deal with the EU was on the verge of collapse despite seven years of talks.

The weaker yen provided further support to Japan's exporters, lifting the Nikkei 0.6 per cent higher by the break.

Shares in Kyushu Railway rocketed 20 per cent as the former state-owned firm made its Tokyo trading debut after the year's third biggest initial public offering worth US$4.0 billion.

"With the US economy looking solid and a rate hike by year-end looming in investors' minds, the yen is weakening, and boosting expectations for a recovery in earnings in the second half of the year," Toshihiko Matsuno, a senior strategist at SMBC Friend Securities in Tokyo, told Bloomberg News.

But while Sydney rose 0.7 per cent, Asia's other major indices turned lower. Hong Kong lost 0.1 per cent, Shanghai shed 0.2 per cent, Seoul was 0.7 per cent off and Singapore gave up 0.1 per cent.

Oil traders were moving uneasily on worries about an agreed output cut by Opec and Russia, with comments from Iraq's oil minister that it should be exempt fuelling worries the deal can be implemented.

AFP