Dollar Extends Fed Gains as Asia Stocks Fall; Gold Weaker

New York (Mar 20)  The dollar extended gains against major and emerging-market peers and Asian stocks outside Japan declined after the Federal Reserve signaled a timetable for raising interest rates. Gold held near a three-week low while Australian and Singaporean bonds followed Treasuries (USGG2YR) lower.

The greenback gained at least 0.3 percent versus the Australian and New Zealand dollars and reached a one-month high against Malaysia’s ringgit and the Korean won. The MSCI Asia Pacific Index fell a second day, losing 0.6 percent by 9:23 a.m. in Tokyo as Japan’s Topix Index climbed. Standard & Poor’s 500 Index (SPX) futures were little changed. Gold was steady near the lowest level since Feb. 28, while yields on 10-year Australian and Singaporean debt climbed at least four basis points.

Fed officials boosted their forecast for the key rate, saying benchmark borrowing costs would rise to 1 percent by the end of 2015 and 2.25 percent a year later. The central bank’s bond-buying program, which was reduced by another $10 billion, will be wound down by year-end with a rate increase to follow within six months, Chair Janet Yellen indicated. Asset purchases and near zero interest rates have helped push the S&P 500 gauge up as much as 178 percent from a 12-year low.

“It’s significant that the Fed fund rate would rise to 1 percent by the end of 2015,” Toby Lawson, head of futures, options and cash equities trading for Asia Pacific at Newedge Group SA in Sydney, said by phone. “We could see capital outflows from emerging markets back into the U.S., especially given residual concerns about China’s economy slowing.”

Dollar Index

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed in early trading today after jumping 0.8 percent in New York, its biggest one-day advance since August.

The won lost 0.4 percent to 1,074.98 a dollar in a third declining day, while the ringgit retreated 0.6 percent to 3.2968 a dollar, the lowest intraday level since Feb. 24. The yen was little changed at 102.38 per dollar after yesterday’s 0.9 percent drop, the most since January.

One-month non-deliverable forwards on the Indian rupee weakened 0.3 percent, while similar contracts on the Indonesian rupiah slid 1.1 percent.

New Zealand’s currency lost 0.4 percent to 85.29 U.S. cents, extending yesterday’s 0.7 percent decline after the statistics office said third-quarter gross domestic product increased 1.2 percent, down from a previous estimate of 1.4 percent. The South Pacific nation’s economy expanded 0.9 percent in the last three months of 2013, in line with projections.

Source:  Bloomberg