Dollar, yen gain as China moves to curb lending
The dollar and yen rose against the euro, reversing earlier losses, amid speculation China will take further steps to cool its economic growth, curbing demand for higher-yielding assets. Japan’s currency strengthened versus all 16 of its major counterparts.
The yen rose to 126.30 per euro in Tokyo from 127.75 earlier in New York. It touched 126.21, the highest since April 28. The dollar advanced to $1.4081 per euro from $1.4151. Japan’s currency climbed to 89.74 per dollar from 90.28. It touched 89.56, the strongest since December 18.
China’s central bank has driven bill yields higher to reduce funds in the banking system on concern record loan growth will fan inflation and lead to property bubbles.
“The mood in the market is bleak and the environment clearly seems to be shifting away from one of taking risks,” said a trader for a major Japanese trading firm.
He said the yen’s rise and falls in equities were a resumption of moves toward risk reduction seen last week.
Gains in the dollar were limited as the Federal Reserve is forecast to keep its key overnight rate in a range between zero and 0.25 per cent today. “The Fed is widely expected to leave both policy unchanged and maintain the ‘extended period’ line in describing how long they will keep rates at accommodative levels,” said Danica Hampton, a senior strategist at Bank of New Zealand in Wellington.
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