Dollar higher as emerging market selloff continues Investing - The dollar moved higher against the euro and the pound on Thursday, after the Federal Reserve tapered stimulus, while a renewed selloff in emerging markets underpinned safe haven demand. Dollar higher as emerging market selloff continuesDollar higher as emerging market fears spur flight to safety The dollar was boosted after the Federal Reserve rolled back its bond purchasing program by another $10 billion to $65 billion-per-month at its policy meeting on Wednesday. Fears over emerging markets continued to weigh on risk appetite after rate hikes by central banks in Turkey and South Africa failed to prop up their currencies. Emerging economies such as Turkey and South Africa rely heavily on foreign investor flows to fund their current account shortfalls, making them particularly vulnerable to a reduction in global liquidity as the Fed scales back stimulus. The Turkish lira was down more than 1% against the dollar, having lost all of the gains created by Tuesday’s night’s massive interest rates hikes, while South Africa’s rand hit five year lows against the dollar. Market sentiment was also hit by renewed fears over a slowdown in China after revised data on Thursday showed that China’s HSBC manufacturing index ticked down to a six-month low of 49.5 this month, below the preliminary estimate for 49.6. EUR/USD hit 1.3586, the lowest since January 23 and was last down 0.40% to 1.3608. The euro shrugged off data showing that the number of unemployed people in Germany fell by 28,000 in December, outstripping expectations for a decline of 5,000. The German unemployment rate was unchanged at 6.8%. A separate report showed that Spain’s recovery picked up in the fourth quarter, with gross domestic product expanding by 0.3%, up from 0.1% in the three months to September. Elsewhere, USD/JPY was up 0.18% to 102.44 after falling to session lows of 102.54 earlier. The pound was lower against the dollar, with GBP/USD falling 0.53% to 1.6475. The dollar gained ground against the Swiss franc, with USD/CHF advancing 0.49% to 0.8988. The New Zealand dollar was trading close to one-month lows, with NZD/USD down 0.74% to 0.8152. The drop in the kiwi came after the Reserve Bank of New Zealand left rates on hold on Wednesday, disappointing some market expectations for a rate hike. The RBNZ left the cash rate unchanged at a record low of 2.5%, but said the country’s economic expansion has considerable momentum and added that a return of interest rates to more normal levels can be expected soon. The Australian dollar edged higher, with AUD/USD easing up 0.17% to 0.8754, up from lows of 0.8711. The Canadian dollar steady at four-and-a-half-year lows against the U.S. dollar, with USD/CAD edging up 0.12% to 1.1180. The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.39% to 80.94
Posted on: Thu, 30 Jan 2014 14:03:52 +0000
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