Dollar, yen up on growth fears, Yellen speech in focus

TOKYO: Asian traders shifted to safety Thursday with the dollar extending gains against emerging currencies as China concerns lingered ahead of a keenly awaited speech later in the day by US Federal Reserve chief Janet Yellen.

Traders were spooked last Thursday when the Fed held off hiking interest rates, with Yellen citing concerns about China's woes and a developing market slowdown, which fuelled worries about the US outlook.

Investors hope Yellen will use her upcoming speech to shed more light on when the central bank will lift borrowing costs, with some economists saying a lack of clarity is worse for global markets than an actual hike.

While the dollar initially retreated after last Thursday's decision, it has risen this week against most emerging currencies after three Fed regional presidents argued for a lift-off by 2016 saying the US economy was strong enough.

And it extended those gains in Asia Thursday. The Australian dollar was 0.12 percent lower, the South Korean won eased 0.08 percent, Indonesia's rupiah lost 0.21 percent and Malaysia's ringgit sank 0.67 percent. There were also losses for the Taiwan dollar and Thai baht.

Economists expect a rise in interest rates would likely see a flight of cash from emerging economies as investors look for better and safer returns in the United States.

The yen, which is considered a go-to currency in times of uncertainty and turmoil, advanced against the dollar and euro.

The greenback fell to 120.02 yen from 120.28 yen Wednesday in New York, while the European single currency dropped to 134.31 yen from 134.50 yen. The euro was also at $1.1195 against $1.1182.

"We're seeing risk-off trade on back of weakness in stocks," Tsutomu Soma, department manager of fixed-income business unit at Rakuten Securities in Tokyo, told Bloomberg News.

"Even though the Fed remained pat in the last (Federal Open Market Committee), the uncertainty remains," Soma said.

Global markets have been sent spinning over the past month after China's shock devaluation of its yuan currency ignited fears about the state of the world's number two economy -- a key driver of global growth.

Concerns were amplified Wednesday by news that a gauge of Chinese manufacturing activity for September hit a six-and-a-half-year low, the latest in a string of disappointing results highlighting a sharp growth slowdown in the Asian powerhouse.