GO
Loading...

FOREX-Dollar buoyant as Fed taper lifts U.S. Treasury yields

Lisa Twaronite
Thursday, 19 Dec 2013 | 11:55 PM ET

* Yen under pressure as BOJ stands pat as expected

* Aussie wallows near 3-1/2-year low hit after Fed

TOKYO, Dec 20 (Reuters) - The dollar remained on a firm footing in Asia on Friday, supported by a rise in U.S. Treasury yields a day after the U.S. Federal Reserve said it would start to cut its bond-buying stimulus.

The yen stayed under pressure after the Bank of Japan held its monetary policy steady, as expected, and also maintained its view that the economy is recovering moderately.

"The yen is a bit weaker, but today's moves are very small, with many people in overseas markets already winding down ahead of the holiday next week," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank.

The greenback was up 0.2 percent at 104.43 yen after nudging up to a fresh five-year high of 104.46 yen on the EBS trading platform.

The euro added 0.1 percent on the day against its Japanese counterpart to buy 142.46 yen, within sight of its five-year high of 142.89 yen struck after the Fed's move this week.

BOJ Governor Haruhiko Kuroda is likely to stress at a post-meeting news conference later on Friday that the BOJ remains committed to its ultra-easy monetary policy even as the Fed begins cutting back on its massive asset-buying stimulus programme.

Nearly two-thirds of Japanese firms expect the BOJ to ease further, though, in the first six months of 2014, as it tries to achieve 2 percent inflation within two years, a Reuters poll showed earlier this month.

Citi's Japan economics team expects the BOJ to opt for additional quantitative easing measures in June or July next year. The dollar is seen reaching an upside target of 108 yen around the same time as the BOJ's steps, they said in a research note.

Meanwhile, rising U.S. Treasury yields gave the dollar a lift, with the benchmark 10-year yield rising to a three-month peak of 2.9512 percent on Thursday.

The dollar is likely to keep benefiting from this, as well as the Fed's eventual steps to tighten once its tapering is complete.

"Combined with solid economic growth, we expect the Fed to begin raising rates in mid-2015, earlier than it currently anticipates," strategists at Barclays said in a note to clients.

Markets are likely to price in the likelihood of higher U.S. interest rates much sooner, they added, and "the normalisation of the U.S. rates curve should add to USD gains."

The euro was down about 0.1 percent against the dollar at $1.3642 after sinking as low as $1.3632, its deepest nadir against the dollar since Dec. 6.

The Australian dollar wallowed not far from a 3-1/2-year low hit after the Fed revealed its stimulus reduction plans.

The Aussie fell as far as $0.8820, its lowest since August 2010, and was last flat on the day at $0.8866.