Dollar whips yen after minutes as Japan stocks rise

WELLINGTON — The US dollar jumped to an 11-week high versus the yen after minutes of the Federal Reserve’s last meeting reinforced the case for an interest-rate increase before the year is out.

Japanese stocks rallied, while crude oil continued its decline.

The Bloomberg Dollar Spot Index built on its advance at a seven-month high after the minutes showed several officials thought a rate hike was needed “relatively soon”.

The Korean won weakened before a review of monetary policy, as the Australian and New Zealand currencies also declined. The yen’s losses sparked a rebound in Japan’s Topix index as shares in Australia fell.

US crude dropped a third session amid speculation the OPEC output deal won’t succeed. Australian government bonds snapped a seven-day slump.

Minutes of the Fed’s September meeting showed the decision to keep rates on hold was a close call, with three members voting to raise. Odds on an increase in US borrowing costs by the end of the year remain around 68 per cent, according to Fed funds futures, up about six per centage points from a week ago.

Better-than-estimated data on manufacturing to services coupled with concern inflation will accelerate is supporting the bets. Higher US rates would further amplify the country’s divergence from policy in Japan and Europe.

“The market is becoming more confident that there is growth momentum in the U.S. economy finally,” Mr Paresh Upadhyaya, a strategist at Pioneer Investment Management in Boston, which oversees about US$221 billion, told Bloomberg Radio’s Daybreak Asia programme.

“In the minutes, it changed its language to relatively soon, sending a really strong signal that they prefer to hike in December.”

China is scheduled to post data on trade on Thursday, while the Bank of Korea is projected by economists to leave benchmark rates on hold. India, where markets resume after a two-day holiday, will report on consumer prices.

Bloomberg’s dollar index, a gauge of the greenback against 10 major peers, climbed for a fourth straight session, gaining 0.2 per cent earlier this morning. The measure is on track for a 1 per cent advance in the week.

“The US has a rate-tightening bias and the rest of the world generally has a rate-easing bias,” said Philippe Bonnefoy, the founder of Switzerland-based hedge fund Eleuthera Capital. “The dollar is responding to that. The dollar is very comfortably bid and that bid will continue into year-end.”

The yen lost 0.4 per cent to 104.54 per dollar and touched 104.63, its weakest level since July 29.

The won drove declines versus the greenback Thursday, slipping 0.3 per cent in a third day of losses. New Zealand’s dollar fell its lowest point since July, losing at least 0.3 per cent with the Australian dollar. BLOOMBERG