Share

Dollar suffers further losses as Fed fails to inspire

Hong Kong - The dollar suffered fresh losses on Thursday as Asian investors followed their New York counterparts in shifting out of the unit, unmoved by another interest rate hike and an upbeat assessment of the world's top economy.

The greenback sank after the much-anticipated central bank meeting, which provided little to excite buyers, despite tentative hopes US lawmakers are on course to push through market-friendly tax cuts.

The Fed lifted borrowing costs as expected and said economic growth would be stronger than initially forecast, while inflation would also improve. It also said its projections for three more rate rises next year were on course.

However, Marvin Loh, senior global market strategist at Bank of New York Mellon, told Bloomberg News: "Markets are generally interpreting the meeting as a dovish hike.

"The improved view in 2018 may be driven by tax reform, which will not have a long-lasting impact."

A below-par reading on inflation added to selling in the dollar, which retreated against most other currencies in New York. It fell through the ¥113 mark, while the pound was above $1.34 and the euro broke $1.18.

And in Asia it continued to struggle, while the Australian dollar surged 1.5% against the greenback, supported by a better-than-expected jobs reading from Canberra.

There were also healthy gains for the South Korean won, South African rand and Mexican peso.

Greg McKenna, chief market strategist at AxiTrader, said the weakness in the dollar "suggests (investors) don't believe the Fed's outlook nor its rate projections".

Tax cut hopes

Adding to nervousness among traders was the Republicans' shock loss in the Alabama senate election, which narrowed their majority to just two - fuelling concern that Donald Trump will struggle to push through many of his promised reforms.

However, there is hope his much-vaunted tax cuts will pass through before the Democrats' newest senator takes his seat.

Reports said Wednesday that Republicans in both chambers of Congress had reached an agreement in principal on the massive tax bill, setting the stage for its final passage next week.

Equity markets were mixed in Asia, brushing off another record for the Dow in New York.

Tokyo ended the morning 0.1% lower as exporters were weighed by a stronger yen, while Shanghai dipped 0.2% and Singapore shed 0.6%.
However, Hong Kong was up 0.1% and Sydney gained 0.2%, while Seoul put on 0.7%.

Taipei, Manila and Wellington were all in positive territory.

Oil prices edged up but only made a small dent in Wednesday's losses, which came despite another report showing US inventories had fallen.
"That suggests a lot of, perhaps all, the current news about tightness in the oil market is already priced," said McKenna.

There are also worries that an output cap agreed by major producers in OPEC and Russia could be lifted next year.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders