Dollar rally plugs on, Tokyo boosted by soft yen

The dollar barrelled ever higher against most currencies Thursday, sitting at an eight-month high against the yen and hitting a record high against the Indian rupee.

The surge in the greenback helped fuel another rally in Tokyo but traders in most other markets turned cautious after recent healthy gains.

US investors gave their Asian colleagues another strong lead with the Dow hitting a new record on Wall Street after fresh data showed further improvement in the US economy and reinforced expectations for an interest rate hike next month.

Global markets have largely been piling higher since Donald Trump's shock election win two weeks ago, with traders betting his big spending, high tax plans will bolster an already healthy economy.

However, there are concerns among emerging market governments that his threats to tear up global trade deals could lead to an era of protectionism and throw up huge US tariffs.

“There’s a favourable bias to equities, given the expectations post Trump’s election that US growth will pick up as a result of more fiscal spending and a reduction in corporate tax rates,” Chris Green, director of economics and strategy at First NZ Capital Group in Auckland, told Bloomberg News.

The near certainty that Trump's policies will fuel inflation, forcing the Federal Reserve to lift rates, has pushed the dollar higher.

On Thursday it broke 113 yen for the first time since April, while it was also at a 20-month high on the euro.

The tumbling yen lifted exporters on Tokyo's Nikkei index, which ended 0.9 percent higher.

- Trader caution -

The Indian rupee also succumbed to the dollar's drive, with the US unit hitting an all-time high 68.8625 rupees.

India's currency has been under pressure since Prime Minister Narendra Modi announced this month that the two largest denomination notes would be withdrawn from circulation to tackle corruption and tax evasion.

Uncertainty caused by the decision has also led foreign investors to withdraw capital from the Asia's third-largest economy, fuelling speculation the central bank will intervene.

“The market is watching whether the central bank prevents the currency from sliding to a new low,” Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank, said

Other high-yielding Asia-Pacific currencies took a beating as investors removed their cash to seek out better returns in the US. South Korea's won fell 0.3 percent and the Australian dollar slipped 0.7 percent while there were also sharp losses for the Indonesian rupiah, Thai baht, New Zealand dollar and Malaysian ringgit.

The greenback also broke above 50 Philippine pesos for the first time since the height of the financial crisis in 2008.

While the across-the-board losses were pared on most stock markets, traders remained cautious.

Hong Kong fell 0.3 percent, Sydney and Shanghai ended flat and Seoul was off 0.8 percent. Singapore added 0.2 percent and Taipei slipped 0.3 percent.

Jakarta dropped almost two percent and Bangkok dipped 0.3 percent.

In early European trade London rose 0.1 percent, while Frankfurt and Paris each added 0.3 percent.

Minutes from the Federal Reserve policy meeting this month showed most board members thought a rate hike would be appropriate "relatively soon". And those thoughts were backed up by figures showing a surge in durable goods orders.

Oil prices edged up but were weighed by the strong dollar and unease about the chances of success for a deal within OPEC and with Russia on cutting output, with less than a week until its twice-yearly meeting.

Gold was also taking a beating, sinking more than two percent to nine-month lows around $1,185.

- Key figures around 0800 GMT -

Tokyo - Nikkei 225: UP 0.9 percent at 18,333.41 (close)

Hong Kong - Hang Seng: DOWN 0.3 percent at 22,608.49 (close)

Shanghai - Composite: UP 0.02 percent at 3,241.74 (close)

London - FTSE 100: UP 0.1 percent at 6,822.01

Euro/dollar: DOWN at $1.0522 from $1.0551 Wednesday

Dollar/yen: UP at 113.50 yen from 112.48 yen 

Pound/dollar: DOWN at $1.2423 from $1.2438

Oil - West Texas Intermediate: DOWN three cents at $47.93 a barrel

Oil - Brent North Sea: DOWN seven cents at $48.88

New York - Dow:  UP 0.3 percent at 19,083.18 (close)

Source: AFP