Dollar rises as dealers seek safe haven

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GMT - 3 Hours Dollar rises as dealers seek safe haven

Post by yaad on Fri Sep 23, 2011 5:32 pm

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TOKYO: The dollar rose in Asian trade on Thursday as market players shunned risks amid disappointment over the Federal Reserve's new measures to stimulate the flagging US economy.

After several months of selling pressure -- partly caused by the Fed's loose monetary policy - the US currency retraced ground against a number of Asian currencies that have hit record highs in recent months.

The commodities-heavy Australian dollar dipped below parity with the US dollar for only the third time since October, sinking to 99.98 US cents before bouncing back slightly to 100 at 0330 GMT.

Increased risk-aversion also saw the US unit gain against other Asian currencies that have seen steep rises over the past several months.

It was up at Sg$1.2860 from Sg$1.2629 on Wednesday afternoon in Asia, at 1,178.90 Korean won from 1,149.38 and at Tw$30.23 from Tw$29.88.

Against major currencies the greenback was also slightly higher.

It was up to 76.76 yen in Tokyo midday trade from 76.48 yen in New York late Wednesday.

The euro paused after hitting a fresh 10-year low against the yen in New York. The single currency was at 104.15 yen in Tokyo, from 103.74 yen in New York where it briefly fell to a new 10-year low of 103.64.

The euro bought $1.3561, almost unchanged from New York.

After weeks of anticipation that the Federal Reserve would unveil fresh moves to kickstart the US economy, Wednesday's announcement failed to instill confidence in currency traders that brighter times were ahead.

The Federal Reserve unveiled a $400 billion stimulus plan - dubbed "Operation Twist" - to reduce long-term interest rates by switching from short-term bonds to longer-term bonds.

The move would not involve printing any more money -- meaning no more dollars in the system -- but supporters say it could lower rates and prod cash-rich banks to put their idle reserves to work.

The decision "brought disappointment, with the Fed announcing the minimum policy action expected while also warning of significant downside risks to the economic outlook," said National Australia Bank forex strategist John Kyriakopoulos.

"Moody's cutting the credit ratings of three US banks and the Fed referring to 'strains in global financial markets' also weighed heavily on sentiment," he said in a note.

"In response, risk-aversion escalated, which boosted 'safe haven' demand for the USD," he said.

The plan also sent stock markets tumbling Thursday.

The Fed may not be able to take fresh monetary-easing measures considering persistent inflationary pressure, Credit Suisse said in a report.

"It is highly possible that the Fed would have to maintain the status quo at least until the end of the year," pressuring US stock prices, it added. (AFP)
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