Naharnet

Dollar Holds Gains against Yen as Markets Turn Risk-on

The dollar held gains against the yen Wednesday after risk appetite among Asian investors jumped on the back of rising expectations of a rise in U.S. borrowing costs.

Sentiment in regional markets turned sharply positive after stocks in Europe and on Wall Street rallied on Tuesday on much better-than-expected data for U.S. new-home sales, boosting the case for another U.S. interest rate hike.

Official figures showing a surge in U.S. new home sales in April to the highest level in more than eight years sparked a rally in the greenback, analysts said.

While that data is known for high volatility, the blockbuster jump prompted analysts to see a strengthening in the housing market, a key sector for growth in the U.S. economy.

The figures reaffirmed a growing perception that the world's top economy can cope with a gradual rise in U.S. interest rates which could possibly come as early as next month, analysts said.

"The greenback continued moving higher on Tuesday on the back of supportive U.S. home sales data," Stephen Innes, senior trader at Oanda trading group, said in a commentary.

"Dollar-yen found solid footing on the back of upbeat U.S. economic data, improving global risk sentiment as well as growing support for (a rate hike by the Fed)," he added.

On Wednesday, the dollar was at 109.91 yen from 109.99 yen Tuesday in New York, down slightly after trading well above the 110-handle in the morning.

The euro edged higher to $1.1155 and 122.60 yen from $1.1141 and 122.54 yen in U.S. trade.

The U.S. Fed has kept its powder dry so far this year as the world's top economy slowed in the first quarter, after raising key interest rates for the first time in more than nine years last December.

However, higher-yielding emerging market units ticked up against the dollar as investors looked for better returns, with the oil-linked Malaysian ringgit tacking on 0.4 percent and the South Korean won rallying 0.8 percent.

The Indonesian rupiah, Taiwanese and Singapore dollar, Philippine peso and Thai baht also booked healthy gains.

Source: Agence France Presse


Copyright © 2012 Naharnet.com. All Rights Reserved. https://www.naharnet.com/stories/en/210077