Dollar strengthens on China worries

Dollar strengthens on China worries
By AFP on October 20, 2015 8:27 am

Dollar Stock and money. Photo: investing-for-the-future
Dollar Stock and money. Photo: investing-for-the-future
The dollar rose against emerging currencies Tuesday on renewed fears of a global economic slowdown and following comments from a top Federal Reserve official suggesting a US interest rate rise 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 the July-September period.
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.
“The three-week recovery is approaching an exhaustion point,” said Matthew Sherwood, head of investment strategy at Perpetual Limited, in an email to clients.
“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.”
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 0.96 percent on Tuesday and the ringgit lost 0.90 percent while the South Korean won fell 0.85 percent. The Taiwan and Singapore dollars swung between wins and losses against the US unit.
The dollar traded at 119.44 yen compared with 119.50 yen Monday in New York.
With a European Central Bank policy meeting this week, attention will focus on whether it announces any further easing of monetary policy to kick-start 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 $1.1328 from $1.1322 Monday, while it was flat at 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 at Bank of New Zealand in Wellington.
“That’s been quite an effective tactic of keeping euro capped.”