Trump fears fan selloff in Asian currencies, stocks as US dollar soars

A stack of $50 Singapore dollars. The Singapore dollar was 0.4 per cent weaker at 1.4113 as of 11:45am, after tumbling 1.1 per on Thursday (Nov 10).
A stack of $50 Singapore dollars. The Singapore dollar was 0.4 per cent weaker at 1.4113 as of 11:45am, after tumbling 1.1 per on Thursday (Nov 10). PHOTO: ST FILE

HONG KONG (AFP) - The US dollar soared against high-yielding currencies and Asian emerging markets sank on Friday (Nov 11) on the prospect of higher US interest rates, with dealers betting Donald Trump's planned huge spending policies will fire inflation.

The Singapore dollar was 0.4 per cent weaker at 1.4113 as of 11:45am, after tumbling 1.1 per on Thursday. The Straits Times Index was down 0.6per cent.

Despite an all-time high close on Wall Street, investors across Asia turned cautious on uncertainties linked to a Trump presidency, while the Mexican peso fell back towards record lows on worries about the firebrand tycoon's anti-Mexico stance.

After an initial shock, global equities rocketed on news Trump had beaten Hillary Clinton, with investors hoping for business-friendly policies and measures to boost the US economy, a key driver of world growth.

However, there are worries about his plans after saying he will tear up several trade deals while ramping up import duties.

And expectations that Trump's plans for huge spending projects will fan prices have lit a fire under the dollar as dealers bet the Federal Reserve will hike borrowing costs more aggressively to keep prices under control.

That in turn has led to fears of huge capital outflows from the region as investors go back to the US for better, safer returns.

The US dollar almost hit 107 yen for the first time since July in US trade and it maintained most of the gains in Asia, sitting at 106.62 yen - well up from the 101.20 yen touched in the initial panic of Trump's win.

It also surged against the high-yielding units as dealers worry about Trump's protectionist plans. The Indonesian rupiah plunged more than five per cent, Australia's dollar was down two per cent and Malaysia's ringgit lost one per cent.

The South Korean won was 1.6 per cent lower after the country's central bank held interest rates at record lows.

And China weakened its yuan reference rate to beyond 6.8 against the US dollar for the first time in more than six years, with analysts warning the unit could drop further.

The dollar was also up 3.3 per cent at 20.64 Mexican pesos, close to its all-time highs.

The unit - as well as the Mexican stock market - has been hammered by fears Trump will follow through on campaign pledges to renegotiate the North American Free Trade Agreement (NAFTA), as well as pressure the country to pay billions of dollars for a giant border wall.

"The dollar is up against most major currencies supported by an upward revision to US interest expectations and focus on President-elect Donald Trump's pro-growth and inflationary economic policies," Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia, told Bloomberg News.

"Trump's economic policies will force the Fed to raise the funds rate at a faster pace than otherwise, which is dollar bullish."

On Asia stock markets, skittish investors sent Hong Kong 1.5 per cent lower and Seoul 0.9 per cent down, while Taipei, Manila and Jakarta were all down around two per cent.

Japan's Nikkei ended the morning up 0.3 per cent as the weaker yen boosted exporters, although it was down from earlier highs, while Shanghai was up 0.2 per cent and Sydney put on 0.3 per cent.