WASHINGTON • The United States dollar retreated against most of its major peers and emerging market currencies yesterday, 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 currency 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 greenback'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," Mr 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 Asian trade, the US dollar bought 121.04 yen, down from 121.10 yen in New York on Tuesday. The euro was at US$1.0920 against US$1.0954 but sharply up from US$1.0830 last week.
The US dollar has also weakened against the Singapore currency since the Fed rate hike was announced. One US dollar traded at 1.4080 Singdollars at 5.30pm yesterday, compared with 1.4220 on Dec 18, just after the Fed rate hike was announced.
The Malaysian ringgit was trading at 4.3112 per US dollar, a gain of 0.25 per cent.
Australia's dollar rose 0.19 per cent to 1.3846, while the South Korean won was trading at 1,173.20. Taiwan's dollar was steady at 32.8370. There were also increases for the New Zealand and Canadian dollars as well as the Thai baht.