The Australian dollar hit a six-week high and emerging Asian currencies rallied on Friday, as the greenback came under pressure due to increasing doubts that the US Federal Reserve will raise interest rates this year.
Commodity currencies and emerging Asian currencies have enjoyed a banner week as many investors pushed back expectations for the timing of Fed liftoff into next year after last week’s lacklustre US jobs data.
The minutes of the Fed’s September meeting released on Thursday helped reinforce such views, giving a broad lift to riskier assets and putting the greenback under pressure.
The Australian dollar rose to $0.7283 at one point, its highest level since August 24. It last traded at $0.7279, up 0.3 per cent. For the week, the Aussie has risen roughly 3.2 per cent.
Asian currencies
Emerging Asian currencies also rallied. The Indonesian rupiah surged 4 per cent versus the dollar at one point and the Malaysian ringgit climbed more than 3 per cent.
In addition to short-covering by speculators, the rupiah and ringgit seem to be benefiting from some inflows of overseas investor funds, market players said.
Both the rupiah and ringgit had slumped to 17-year lows against the dollar in September, hampered by falls in commodity prices and concerns that the prospect of rising in US interest rates could lead to more capital outflows.
Signs of stability in Chinese equities and a bounce in oil prices have helped improve the market’s sentiment and are likely helping the rupiah and ringgit attract some inflows, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
“The type of anxiety we saw back in mid-August has gone away, at least for now,’’ Murata said.
This week’s rallies in the rupiah and the ringgit are probably a corrective bounce in the wake of their sharp falls since August, and could prove short-lived, Murata added.
China’s surprise devaluation of the yuan in August had stoked concerns about the health of the Chinese economy and a slowdown in global growth, triggering a slide in emerging Asian currencies.
Moves among major currencies in Friday’s Asian trading were generally subdued, with the dollar holding steady against the yen at 119.96 yen, while the euro inched up 0.1 per cent to $1.1284.
Against a basket of six major currencies, the dollar last traded at 95.220. The dollar index had slipped to 94.984 on Thursday, its lowest level in about three weeks.
The minutes of the Fed’s September released on Thursday revealed a deeply cautious central bank that delayed a long-anticipated tightening because policymakers wanted to make sure that a global economic slowdown was not a threat to the US recovery.
“The minutes were viewed as mirroring the dovish tone to the September 17 Fed statement rather than the more hawkish message delivered by a number of Fed speakers in the aftermath of the meeting,’’ analysts at Barclays wrote in a note to clients.