US$ soars on strong retail data, hawkish Fed

US$ soars on strong retail data, hawkish Fed

 

THE US dollar made an impressive comeback in Asia yesterday, surging to a six-week high of S$1.3850 and recording fresh 2008 peaks of 42.67 Indian rupees and 42.85 Philippine pesos. Elsewhere, weaker non-Asian units like the British pound and New Zealand dollar plumbed US-dollar lows not traded for the best part of three and four months respectively.

 

Ahead of a key US CPI release for April, players reported that hawkish warnings from a host of US central bank speakers combined with news of a stronger-than-expected April US retail sales number on Tuesday evening to sponsor the US-dollar spike overnight.

 

Explaining what might have helped to bring out US-dollar buyers in force yesterday, OCBC researchers said in a client note: ‘(San Francisco Fed President Janet) Yellen was also particularly explicit when she stated that ‘I would be pleased if futures markets turn out to be right’ in implying Fed rate hikes late this year.

 

‘Meanwhile, the (Kansas City) Fed’s Hoenig noted that inflation is at ‘unacceptable levels’ while the Dallas Fed’s Richard) Fisher added that ‘we’re at greater risk (from inflation) than the price that would be paid for economic weakness’.’

 

Traders said that although oil prices had slipped a touch, and Wall Street did not impress overnight, the half per cent rise in core US retail sales for April reported overnight might have put US-dollar bears on the defensive yesterday – especially ahead of April US consumer prices due out later on Wednesday evening.

 

Compared with headline and core CPI rises of 0.3 and 0.2 per cent respectively for the month of March, the consensus is that April will match those numbers, but some, like UK-based research firm Forecast, have also called for higher readings of 0.4 and 0.3 per cent respectively.

 

Elsewhere in Asia yesterday, the greenback’s apparent return to favour across the board may also have drawn some support from the fact that it was able to bully its way back above 105 yen – notwithstanding talk of possibly large US Treasury-related repatriations by Japanese bond investors this week. Unusually, too, the US dollar’s gains in Asia exceeded those elsewhere in some cases.

 

By the Asian close, it was 1.8, 1.5 and 1.1 per cent stronger at 3.2725 Malaysian ringgit, 105.33 yen and S$1.3845 respectively – though just 0.2 per cent better at 7.0030 Chinese yuan.

 

In comparison, the Australian and New Zealand dollars finished one per cent softer at 93.1 US cents and 75.98 US cents, while the euro and British pound were a more modest 0.2 and 0.4 per cent worse off – at US$1.5422 and US$1.9391 respectively.

 

Down Under, players said that a 1.5 per cent fall in gold prices combined with a less than aggressive Australian Budget speech to depress the Australian dollar as well.

 

Closer to home, the Malaysian ringgit traded below the key 42.4 Singapore cent support area for the third day in a row, as the US dollar rose more strongly north of the Causeway than it did versus the Singapore dollar. At its low of 42.20 Singapore cents yesterday, the Malaysian ringgit was at its weakest in more than nine years versus the Singapore dollar.

 

Source: Business Times

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