Dollar up in Asia on Fed’s bullish tone

TOKYO- The dollar rose in Asia on Thursday as a slightly bullish turn by the US Federal Reserve fuelled hopes for an early rise in US interest rates.

The greenback hit a three-week high of 109.08 yen in afternoon trade, up from 108.90 yen in New York and 108.12 yen in Tokyo earlier Wednesday.

The euro fell to $1.2594 from $1.2634 in US trade and Wednesday’s $1.2737 in Asia. The single currency was at 137.39 yen compared with 137.60 yen in New York.

On Wednesday the Fed made no unexpected policy changes, announcing the wind-up of its quantitative easing stimulus programme while keeping in place plans to maintain ultra-low interest rates well into 2015.

But a shift to a more optimistic assessment of the labour market, after having shown doubts about gains all year, showed a “hawkish” turn by policymakers, analysts said, bolstering the dollar.

An upbeat view on the economy fuelled speculation that the bank could start raising the key federal funds rate sooner than the expected timeline of mid-2015.

Higher interest rates tend to attract investors to dollar-denominated assets, which would be a plus for the greenback.

The Fed statement “proved to be a more market-moving affair than many had anticipated”, National Australia Bank said in a note.

Credit Agricole added that the “less dovish-than-expected” Fed boosted the dollar.

Investors are now waiting for a string of data later in the day including US third-quarter growth, eurozone October economic sentiment and business climate report, and preliminary German October consumer inflation.

The Bank of Japan holds a policy meeting on Friday.

The dollar climbed against most other Asia-Pacific currencies on Thursday.

It rose to 32.56 Thai baht from 32.50 baht on Wednesday, to Tw$30.39 from Tw$30.36, to 61.44 Indian rupees from 61.28 rupees, to 44.89 Philippine pesos from 44.71 pesos, and to Sg$1.2788 from Sg$1.2724.

The greenback also rose to 1,053.42 South Korean won from 1,047.45 won while edging down to 12,120 Indonesian rupiah from 12,152 rupiah.

The Australian dollar tumbled to 87.65 US cents from 88.66 cents while the Chinese yuan firmed to 17.81 yen from 17.66 yen.