ND:Dollar Recovers Some Ground After Falling to Fresh 7-week Low
By Alexander Martin
The dollar recovered some ground against the yen during Asian trading Monday after falling to fresh seven-week lows as emerging market concerns led investors to seek safe-haven currencies like the yen.
The dollar fell as low as Y101.77 in early morning trade, its lowest level since Dec. 6. It recovered some of the losses as investors bought on dips, and as of 0450 GMT was at Y102.41 from Y102.23 in late New York trading Friday.
Growth concerns have prompted investors to dump emerging market currencies in recent days, with the South African rand and Russian ruble plummeting to new lows as well.
The latest round of emerging market selloffs started Thursday when a disappointing report on Chinese manufacturing sent investors out of risky assets with the Argentine currency suffering double-digit percentage losses and falling the most in more than a decade.
Kosuke Hanao, head of FX at HSBC in Tokyo said the latest selloffs in risky assets were an indication of weakening confidence in the global economy, for which investors were broadly bullish at the beginning of the year.
He said dismal U.S. non-farm payrolls data earlier this month and some data showing slowdowns in emerging economies triggered profit-taking in U.S. and Japan stocks. The latest round of selling may continue in coming sessions, he said, adding that whether or not the dollar falls below Y101.00--the mid-point of its high and the low recorded since end- September--was the key to gauge whether the pair will recover or fall even lower.
Junichi Ishikawa, market analyst at IG Securities in Tokyo said U.S. indicators remained highly significant in upcoming days, with the focus especially on U.S. fourth quarter gross domestic product data, set to be released Thursday, as well as a much anticipated Federal Reserve policy meeting.
"Eyes remain on U.S. share price movements. A recovery in U.S. shares could put a lid on emerging market fears," Mr. Ishikawa said.
Steven Englander, Global Head of G10 FX Strategy, said in a note that the Fed meeting was expected to announce another $10 billion tapering at its FOMC meeting and reiterate forward guidance of ultra-low rates for a long period.
However, he said this was "unlikely to be enough to reassure investors unless the FOMC sends a clear signal that it sees the turmoil in emerging markets and asset markets as a risk to the U.S. recovery," stressing that focus was on what level of comfort the Fed is willing to give international investors.
The Wall Street Journal Dollar Index, a measure of the dollar against a basket of currencies, was at 74.077 from 74.086.
Interbank Foreign Exchange Rates At 23:50 EST / 0450 GMT
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Dollar Rates Close High Low 12/31
