Surprise RBA Hike Triggers Falls in U.S. Dollar

By WSJ Staff

The U.S. dollar saw modest gains posted in morning trade wiped out as it touched a two-week low against the Korean won of 1,110.4 won on the Reserve Bank of Australia’s surprise rate hike, further boosting market expectations for a near-term Bank of Korea rate hike, traders say.

“I’m all for (betting on) a further fall in the dollar/won from here,” as long as FX authorities don’t kick in later to intervene in support of the U.S. dollar, says a local bank trader.

The RBA raised its cash rate 0.25% to 4.75% earlier today.

Meanwhile, the U.S. dollar was quoted at a record low of 1.2882 Singapore dollars after the unexpected RBA hike, and is likely to trade with downward bias, says a currency analyst.

“The RBA move was the trigger for the U.S. dollar’s decline. Australia benefits most from growth in Asian economies, and this move highlights inflation concerns in this part of the world,” an analyst said. “It also gives a fresh focus to the divide between the U.S., which is easing, while Asia is tightening,” he said, adding that the U.S. dollar is likely to remain weak against Asian currencies.

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Dollar-Yen Jumps, Falls on Intervention Fear

By Andrew Monahan

Asian currency trading got off to a jumpy start Monday morning, as the dollar surged against the yen amid speculation of intervention by Japan authorities. Dollar-yen quickly gave up most of its gains as Japanese exporters and others used the spike as an opportunity to sell.

The yen’s moves have been “excessive” recently, a Japanese government official said Monday, but he declined to comment on whether Tokyo authorities intervened in the foreign exchange market to knock the currency lower.

Meanwhile, traders say the pair’s bias remains down, particularly if the government has not stepped in. Akira Hoshino, senior FX dealer at Bank of Tokyo-Mitsubishi UFJ, says if no intervention is confirmed, then dollar-yen may fall below 80 later in the global day. It was last 80.59.

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