Dollar hits four-month high in Tokyo

Mandy Carr
July 12, 2017

The strength of the Canadian dollar since early May - it's up more than 6% against its USA counterpart - has been driven by increasing expectations that the Bank of Canada will join the Fed as the second major central bank raising interest rates as the economy continues to expand rapidly. The Shanghai Composite index yoyo'd and eventually ended the day down 0.3 percent at 3,203.04, while shares in Southeast Asia were mixed.

Asian stocks followed Wall Street and Europe higher on Tuesday as investors awaited cues from the USA corporate earnings season as well as Federal Reserve Chair Janet Yellen's semi-annual testimony before Congress on Wednesday and Thursday.

Wall Street stocks treaded water early Tuesday ahead of the always closely-watched congressional testimony from Federal Reserve Chair Janet Yellen.

On Monday data showed that exports from Germany, the biggest economy in Europe, increased stronger than was expected during May.

The dollar was 0.1 percent higher at 114.190 yen following a rise to a two-month high of 114.300 overnight.

"Unlike in recent years, where there was very patchy growth across the world, we are seeing a synchronised upswing in the global economy", said Alex Dryden, global market strategist at JP Morgan Asset Management.

"I think the increased hawkishness we have seen from the central banks has led to a fear that we could see a mini-taper tantrum", he said.

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The Bank of Canada, which meets Wednesday, is widely expected to raise interest rates after strong signals in speeches for such action over the past month.

The dollar index, which gauges the greenback against a currency basket, was steady at 96.018. Against the euro, the dollar is valued at USD1.1393 compared to last Friday's USD1.1402.

A rate rise from Canada's central would be its first interest rate rise in almost seven years.

He added that the Bank of Japan in contrast is not anywhere close to exiting its policy and has taken steps to weaken its yen.

International Container Terminal Services was among the biggest gainers on the index, climbing as much as 2.6 percent, after signing an agreement with a dredging company to deepen the Congo River in Africa, a move that would realise cost savings for the terminal operator from 2018. The latest US economic reports, particularly for jobs, have been upbeat.

Gold has come under renewed pressure in recent days, as investors recalibrated their outlook on USA monetary policy in the light of recent economic data.

Increased drilling activity in the United States and uncertainty over Libyan and Nigerian production cuts clouded the future supply outlook, leaving US crude CLc1 down a third of a dollar at $44.13 a barrel and Brent LCOc1 at $46.57.

Other reports by Guamnewswatch

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