Dollar extends gains in Asia as Fed heads for rate hike
HONG KONG, (APP/AFP) - The dollar built on the previous day's gains Thursday after the Federal Reserve unveiled plans to wind down its crisis-era stimulus and hinted at another interest rate hike before the end of the year.
Fed boss Janet Yellen said the world's biggest economy was "performing well" while it emerged after a closely watched meeting that most members of the policy board wanted to lift borrowing costs by December.
The central bank also announced it would next month begin cutting back on its holdings of bonds and other assets built up as part of a scheme to keep rates low and steer the economy through the financial meltdown.
Yellen said policymakers would react accordingly to any negative impacts on the economy, adding that persistently low inflation would likely come to an end.
She also said if prices rose too quickly the bank would be able to lift rates quicker.
"It doesn't get any more brazenly hawkish from Dr Yellen, who along with the majority of her colleagues are clearly in the December rate hike camp and the markets are reacting to this news," said Stephen Innes, head of Asia-Pacific trading at OANDA.
And in Asia the greenback continued to advance, with other higher-yielding currencies including the Australian and Canadian dollars, South Korean won and Indonesia's rupiah all well down.
- Equities struggle -
The dollar 's gains come after a run of losses in recent months as tepid inflation and a lack of movement on Donald Trump's economic agenda in Congress had seen investors bet on no more rate hikes this year.
The jump in the dollar against the yen boosted Japanese exporters, which helped the Nikkei index close the morning session 0.8 percent higher.
Toshiba sank after saying it would sell its memory chip business for around $18 billion, with its US partner Western Digital vowing to block the deal, which is seen as crucial to the Japanese firm's survival.
However, most other regional markets retreated. Hong Kong, where monetary policy is linked to that of the United States, slipped 0.1 percent while Sydney shed one percent.
Shanghai was also off 0.1 percent, Singapore eased 0.3 percent and Seoul retreated 0.2 percent. Wellington slipped 0.5 percent but Taipei was up 0.4 percent and Manila put on 0.6 percent.
On oil markets, both main contracts dipped following an almost two percent rally Wednesday on data showing US gasoline stockpiles had fallen to a 22-month low.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: UP 0.8 percent at 20,479.88 (break)
Hong Kong - Hang Seng: DOWN 0.1 percent at 28,095.01
Shanghai - Composite: DOWN 0.1 percent at 3,363.64
Euro/dollar: DOWN at $1.1870 from $1.1898 at 2100 GMT
Dollar/yen: UP at 112.48 yen from 112.15 yen
Pound/dollar: DOWN at $1.3480 from $1.3495
Oil - West Texas Intermediate: DOWN three cents at $50.66 per barrel (new contract)
Oil - Brent North Sea: DOWN 18 cents at $56.11
New York - DOW: UP 0.2 percent at 22,412.59 (close)
London - FTSE 100: DOWN 0.1 percent at 7,271.95 (close)