HONG KONG: The dollar retreated against most of its major peers and emerging market currencies Wednesday, as analysts predict the Federal Reserve could hold off another hike in borrowing costs until April.
As the effects of last week's greenback rally -- fuelled by the US central bank's first rate rise in almost a decade -- wear off, pressure has built on the unit as dealers decide to cash in at the end of the year.
With a sense of optimism reappearing in regional markets -- and demand for higher-risk assets -- Asia tracked a rally on Wall Street for a second-successive day, boosting emerging currencies. And a lift in oil prices also supported commodity-based units.
The dollar's losses also come despite upbeat readings on US growth and consumer spending that indicate the Fed's decision to begin lift-off was well justified.
"There's some paring of outstanding dollar long positions with investors reluctant to carry dollar exposure into the holidays," Ray Attrill, co-head of currency strategy at National Australia Bank in Sydney, told Bloomberg News.
"If you want to be at least modestly constructive on the US dollar early next year, which we are at this stage, you're probably going to need to see the market attaching a higher probability" to the Fed raising rates in the first quarter, he said.
In morning Asian trade the dollar bought 121.03 yen, down from 121.10 yen in New York Tuesday and well off the levels above 123 yen touched last week. The euro was at $1.0950 against $1.0954 but sharply up from the $1.0830 mark last week.
Australia's dollar rose 0.04 percent against the US unit, while the South Korean won was 0.2 percent higher and Taiwan's dollar gained 0.1 percent. There were also increases for the New Zealand and Canadian dollars as well as the Thai baht.
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