Dollar extends rally in Asia

The dollar continued to brush aside other currencies yesterday after further proof of the booming US economy sent Treasury yields surging, but Asian equities sank with more Federal Reserve rate hikes looking certain, reports AFP from Hong Kong.

A forecast-busting private jobs report, a surge in activity in the services sector and optimism in the retail market were the latest evidence that the world's top economy is firing on all cylinders, helping send the Dow to a record close for the second day in a row.

However, the news also saw a sell-off in safe-haven Treasuries -- a sign of confidence -- sending the cost of borrowing to its highest level in seven years, in turn fuelling a surge in the dollar, helping it hit an 11-month high against the yen.

Hawkish comments from Fed boss Jerome Powell also provided momentum to dollar buying. The greenback extended Wednesday's gains against its major peers, with easing concerns about a row between Italy and EU leaders unable to staunch a sell-off in the euro.

Higher-yielding and emerging market currencies were among the worst hit. The Chinese yuan took a hit, despite mainland markets being closed. The dollar jumped 0.2 per cent to 6.9 against the offshore yuan, with some predicting it could break 7 at some point.

The US unit hit a record 73.82 Indian rupees and a fresh 20-year high against the Indonesian rupiah, with the two countries battered by surging oil prices and an outflow of cash as investors shift attention to US assets.

It was two per cent higher against the South African rand, 1.5 per cent up on the Mexican peso and one per cent higher against the Australian dollar and South Korean won.

The New Zealand dollar and Thai baht were also sharply lower.

The prospect of borrowing becoming even more expensive rattled equity traders in Asia.

Hong Kong lost 1.7 per cent with property firms hit by concerns the higher rates -- the city's monetary policy is linked to the Fed's -- will hammer the booming real estate market.

Tokyo ended 0.6 per cent lower, while Singapore, Seoul, Manila, Taipei and Jakarta shed more than one per cent. Mumbai was down 2.3 per cent. Sydney added 0.5 per cent while Shanghai was closed for a public holiday.

"This withdrawal of liquidity and gradual tightening of monetary policy" by the Fed is reverberating across financial markets, Bob Baur, chief global economist at Principal Global Investors, told Bloomberg TV. He warned US Treasuries would likely rise further "later this year, early next year -- and I think that's going to be a real problem for stock markets."

However, Stephen Innes, head of Asia-Pacific trading at OANDA was more upbeat about the outlook. "With positive signs gradually showing up for Shanghai and the Nikkei, Asia equities,

while still pulling up the rear, should make leaps and bounds this quarter, even more if the US and China resolve their trade issues."

Dollar extends rally in Asia

The dollar continued to brush aside other currencies yesterday after further proof of the booming US economy sent Treasury yields surging, but Asian equities sank with more Federal Reserve rate hikes looking certain, reports AFP from Hong Kong. A forecast-busting private jobs report, a surge in activity in the services sector and optimism in the retail market were the latest evidence that the worlds top economy is firing on all cylinders, helping send the Dow to a record close for the second day in a row. However, the news also saw a sell-off in safe-haven Treasuries -- a sign of confidence -- sending the cost of borrowing to its highest level in seven years, in turn fuelling a surge in the dollar, helping it hit an 11-month high against the yen. Hawkish comments from Fed boss Jerome Powell also provided momentum to dollar buying. The greenback extended Wednesdays gains against its major peers, with easing concerns about a row between Italy and EU leaders unable to staunch a sell-off in the euro. Higher-yielding and emerging market currencies were among the worst hit. The Chinese yuan took a hit, despite mainland markets being closed. The dollar jumped 0.2 per cent to 6.9 against the offshore yuan, with some predicting it could break 7 at some point. The US unit hit a record 73.82 Indian rupees and a fresh 20-year high against the Indonesian rupiah, with the two countries battered by surging oil prices and an outflow of cash as investors shift attention to US assets. It was two per cent higher against the South African rand, 1.5 per cent up on the Mexican peso and one per cent higher against the Australian dollar and South Korean won. The New Zealand dollar and Thai baht were also sharply lower. The prospect of borrowing becoming even more expensive rattled equity traders in Asia. Hong Kong lost 1.7 per cent with property firms hit by concerns the higher rates -- the citys monetary policy is linked to the Feds -- will hammer the booming real estate market. Tokyo ended 0.6 per cent lower, while Singapore, Seoul, Manila, Taipei and Jakarta shed more than one per cent. Mumbai was down 2.3 per cent. Sydney added 0.5 per cent while Shanghai was closed for a public holiday. This withdrawal of liquidity and gradual tightening of monetary policy by the Fed is reverberating across financial markets, Bob Baur, chief global economist at Principal Global Investors, told Bloomberg TV. He warned US Treasuries would likely rise further later this year, early next year -- and I think thats going to be a real problem for stock markets. However, Stephen Innes, head of Asia-Pacific trading at OANDA was more upbeat about the outlook. With positive signs gradually showing up for Shanghai and the Nikkei, Asia equities, while still pulling up the rear, should make leaps and bounds this quarter, even more if the US and China resolve their trade issues.