Reuters: US Dollar Report: FOREX-Dollar gains on Fed tapering view; China data supports Aussie

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FOREX-Dollar gains on Fed tapering view; China data supports Aussie Aug 22nd 2013, 06:52 Thu Aug 22, 2013 2:52am EDT * Dollar gains vs yen, seen supported by rise in U.S. yields * Fed minutes shed little light on timing of QE tapering * But September tapering still seen as a possibility * Aussie bounces vs yen on upbeat flash HSBC PMI for China By Masayuki Kitano SINGAPORE, Aug 22 (Reuters) - The dollar rose versus the yen on Thursday after the minutes of the Federal Reserve's July meeting did little to alter expectations that the U.S. central bank may start tapering its monetary stimulus as early as September. The greenback extended its gains versus the Japanese currency after a preliminary private survey showed that activity in China's manufacturing sector hit a four-month high in August. The survey reinforced signs of stabilisation in China, triggering a bounce in the Australian dollar versus the yen. That helped drag the yen broadly lower on the crosses and also against the U.S. dollar, which rose 0.6 percent on the day to 98.27 yen. A possible resistance for the dollar is at 98.66 yen, an intraday high set on Aug. 15. The greenback seemed to be drawing strength from a push higher in U.S. yields, said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo. "I think the dollar is purely being bought on the back of a widening in interest rate differentials," he said, adding that there was some talk of hedge fund buying of the dollar versus the yen in the early part of the Asian session on Thursday. The U.S. 10-year Treasury yield set a fresh two-year high of 2.936 percent on Thursday. Such a rise in yields can increase the attractiveness of dollar-denominated assets. The greenback inched higher versus the euro, which slipped 0.1 percent to about $1.3340. The dollar's strength was more obvious against some emerging Asian currencies, which have been dented by market expectations that the Fed may soon start reducing its bond purchases of $85 billion per month. That stimulus had helped spur inflows into emerging markets. The dollar hit a three-year high versus the Thai baht and Malaysian ringgit, and set a four-year high versus the Indonesian rupiah. The dollar also set a record high versus the Indian rupee on Thursday. Some market players say the turmoil in emerging markets is increasing the appeal of perceived safe-haven currencies such as the yen. Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, said the dollar was stuck in a tug-of-war versus the yen as a result. "There is the flight-to-quality type of yen buying on the one hand, but there is also dollar-buying on the back of rising U.S. yields," Okagawa said. The Fed minutes released on Wednesday showed members of the Federal Open Market Committee had different opinions as to when the Fed should start winding down its bond purchases. The overall view, however, was that the minutes did not materially change the market's expectation that the Fed could start tapering its monetary stimulus as early as September. Analysts say August nonfarm payrolls data, due on Sept. 6, will be closely watched by investors and policymakers to determine whether the improvement in the labour market is enough to justify scaling back the stimulus. The Australian dollar inched up 0.1 percent to $0.8983 , having bounced from an intraday low of $0.8932. Against the yen, the Aussie dollar rose about 0.7 percent on the day to 88.25 yen. Link this Share this Digg this Email Reprints

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