HONG KONG (AFP) - The US dollar retreated against most of its major peers and emerging market currencies on Wednesday (Dec 23), 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.
In morning Asian trade the dollar bought 121.03 yen, down from 121.10 yen in New York on Tuesday and well off the levels above 123 yen touched last week. The euro was at US$1.0950 against $1.0954 but sharply up from the US$1.0830 mark last week.
The US dollar has also weakened against the Singapore currency since the Fed rate hike was announced. One US dollar traded at 1.4056 Singdollars at 12:12 pm on Wednesday, compared to 1:4220 on Dec 18, just after the Fed rate hike was announced.
Australia's dollar rose 0.04 per cent against the US unit, while the South Korean won was 0.2 per cent higher and Taiwan's dollar gained 0.1 per cent. There were also increases for the New Zealand and Canadian dollars as well as the Thai baht.
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.