SINGAPORE, Jan 19 ― The dollar rose broadly today as growth concerns about the US economy drove demand for the safe-haven greenback, while the yen renewed its ascent as investors doubled down on bets that the Bank of Japan would shift away from its yield curve control policy.
Weak US data released yesterday showed that US retail sales fell by the most in a year in December and manufacturing output recorded its biggest drop in nearly two years, stoking fears that the world's largest economy is headed for a recession.
“Those weak data really reinforced market concerns about an imminent US recession ... (which) really supported the dollar, and I think that will become a growing narrative in the coming months,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA).
Sterling fell 0.17 per cent to US$1.2327 (RM5.31), away from the previous session's one-month high of US$1.2435, while the Aussie skidded 0.49 per cent to US$0.6907, after suffering a 0.64 per cent loss yesterday.
The euro shed 0.02 per cent to stand at US$1.0792, similarly some distance from yesterday's nine-month high of US$1.08875, even as French central bank chief Francois Villeroy de Galhau maintained a hawkish stance over the European Central Bank's future rate-hike path.
The fresh wave of risk aversion ― compounded by news of job cuts by tech giants Microsoft and Amazon ― also kept the dollar in bid.
“The effects of the FOMC tightening will just become more and more visible,” Kong said.
However, the greenback failed to eke out a gain against the Japanese yen and was last 0.4 per cent lower at ¥128.42, unwinding most of its previous day's rally in the immediate aftermath of the BoJ's decision to stand pat on its ultra-loose monetary policy.
Defying market expectations, the BoJ kept its interest rate targets and yield band intact, and instead crafted a new weapon to prevent long-term rates from rising too much, in a show of resolve to maintain its YCC policy for the time being.
The decision sent the yen plunging some 2 per cent against the greenback and against other currencies shortly after, alongside Japanese government bond yields, which tumbled the most in two decades at one point on Wednesday.
The euro was last 0.39 per cent lower at ¥138.58, while sterling fell 0.23 per cent to ¥158.27, as markets continued to test the resolve of the BoJ's ultra-dovish stance.
“I think it's really reflecting the fact that market participants are still speculating a shift in the Bank of Japan's policy despite their inaction yesterday,” said CBA's Kong. “While there's still high expectations for a policy shift ... I think that will keep the yen pretty elevated in the near term.”
Elsewhere, the kiwi fell 0.31 per cent to US$0.6425. New Zealand Prime Minister Jacinda Ardern will not seek re-election and plans to step down no later than early February, she said in a televised statement today.
Against a basket of currencies, the US dollar index rose 0.09 per cent to 102.42. ― Reuters