Asian currencies were mostly lower against the greenback this week, with the US unit rising amid speculation the Federal Reserve will raise interest rates earlier next year than predicted. Trade was thin as risk-averse investors mostly stayed on the sidelines in the week leading up to the Christmas period, dealers said.
On Friday, markets gave a tepid response to news that orders for US manufactured durable goods edged up 0.2 percent in November, led by a strong rise in demand for computers and electronics products. "There is very little movement due to the Christmas holiday. Economic indicators in the US and Japan have had little impact on market sentiment," said Societe Generale forex strategist Kenichi Yumoto. But some analysts were sceptical about whether the dollar's rally would continue for much longer.
"We expect the dollar's recovery to stall any time now and anticipate another bout of weakness in the first quarter" of 2010, Dariusz Kowalczyk, chief investment strategist at SJS Markets in Hong Kong, wrote in a note.
JAPANESE YEN: The yen fell against the dollar over the past week, depressed by mounting expectations that the Japanese central bank will be slower than its US counterpart to raise interest rates, dealers said. The Japanese unit declined to 91.30 to the dollar in Tokyo on Friday from 89.84 to the dollar a week ago. There was no trading in New York on Friday for the Christmas holiday.
The dollar benefited from growing speculation that the Federal Reserve will raise interest rates next year earlier than predicted, dealers said. Investors generally prefer currencies offering the prospect of higher yields. In contrast, Japan's central bank has raised expectations that it will keep its key lending rate at the current level of 0.1 percent for some time yet, declaring last week that it "does not tolerate" deflation.
The unemployment rate rose to 5.2 percent in November from 5.1 percent in October, worsening for the first time in four months, the government said. But the report was in line with market expectations.
AUSTRALIAN DOLLAR: The Australian dollar lost ground this week as the greenback rallied, capping off what has otherwise been a stellar year for the commodities and risk-based currency, dealers said.
The Aussie closed Thursday at 88.25 US cents, down slightly from 88.87 a week earlier, ahead of the Christmas holiday. "The Australian dollar has again drifted lower in another week of very thin liquidity as we head into the holiday period," said ANZ economist Amber Rabinov.
"In this environment, it is difficult to see the Aussie returning to trading levels of just a few weeks ago over the coming fortnight, although we have probably seen most of the current move lower," she added.
"Persistent momentum in the current US dollar recovery points to a further softening in the Aussie, with dips towards 86.60 in sight."
Rabinov said the local unit had enjoyed a "wild ride" over the year, trading in a massive 31.50 US cent range between February's lows and a high above 94 US cents in November. "The traditional fundamental drivers of the Australian dollar have all moved one way in 2009 - up," she said.
"Commodity markets played their part, with the Chinese recovery stimulating strong demand and lifting prices for hard commodities." Continued strong economic performance and commodities strength was likely to buoy the Aussie to a new high of 96 US cents by mid-2010, said Rabinov, with the US recovery likely to weigh on it in the second half.
NEW ZEALAND DOLLAR: The New Zealand dollar finished local trading Thursday ahead of the Christmas holiday at 70.54 US cents, down from 71.16 at the end of the previous week. The kiwi fell below 70 US cents on Wednesday following news of weaker than expected gross domestic product data but it rose again as the US dollar came under renewed downward pressure.
The 0.2 percent growth in gross domestic product in the September quarter was less than the 0.3 percent rise the market was expecting, and some in the market believed this could delay any move by the central bank to lift interest rates.
CHINESE YUAN: The yuan closed at 6.8272 to the dollar Friday on the over-the counter market, compared with 6.8280 the week before.
The central bank had set the yuan central parity rate at 6.8283 to the dollar Friday. The People's Bank of China allows a trading band of 0.5 percent on either side of the midpoint.
HONG KONG DOLLAR: The US-pegged Hong Kong unit ended the week flat at 7.756 from 7.757 the week before.
INDONESIAN RUPIAH: The rupiah closed flat at 9,500 to the dollar.
PHILIPPINE PESO: The Philippine peso traded higher at 46.510 to the dollar on December 23, the last trading day for the week, compared to 46.650 on December 18.
SINGAPORE DOLLAR: The Singapore dollar was at 1.4064 to the US dollar from 1.4004 the previous week.
SOUTH KOREAN WON: The won gained ground against the dollar during the week, rising 8.6 won to the US unit on Thursday alone in a shortened pre-Christmas session, as the greenback wobbled against other currencies on weak US economic data. The won closed at 1,175.00 won to the dollar on Thursday, its highest in more than a week, compared with 1,176.2 won on Friday the week before.
Exporters sold the greenback Thursday as the US currency wobbled on lacklustre US economic data, spurring traders to reduce their long-dollar positions. The won has recently tended to be range-bound, with traders buying the dollar below 1,175 won and selling near 1,180 won, dealers said.
TAIWAN DOLLAR: The Taiwan dollar rose 0.33 percent in the week to close at 32.274 against the US dollar from 32.380 a week earlier.
THAI BAHT: The Thai baht continued to weaken against the dollar this week as the dollar rose against regional currencies amid quiet trade expected to last until the New Year, a dealer said. The unit closed Friday at 33.33-35 baht to the dollar compared to last week's close of 33.20-21.