Nikkei rallies as dollar rises after US factory data


The dollar strengthened in Asian trade on Tuesday on increasing expectations the Federal Reserve will lift interest rates while the weaker yen helped Japanese stocks extend the previous day’s rally.

News showing the US manufacturing sector rebounded in September helped turn attention back to US monetary policy, days ahead of the release of a closely watched jobs report.

The speculation added further pressure on sterling against the dollar, while it is also struggling at three-year lows against the euro after British Prime Minister Theresa May set a timetable for leaving the European Union.

US factory activity expanded in September, the Institute for Supply Management said Monday, after showing contraction the month before.

Traders took the report as a sign the world’s top economy is getting back on track and would be able to withstand an increase in borrowing costs. The Fed had considered a rate hike last month but held off, saying it wanted to see more evidence of strength.

“The data is suggesting the Fed will likely raise rates in December,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, told Bloomberg News.

“We’ll probably have a couple of months of stronger data gauging from the strength of new orders. The yen weakness is supportive of Japanese exports.”

The dollar rose to 102.15 yen from 101.63 yen in New York on Monday while the euro dipped to $1.1206 from $1.1211.

Japanese exporters were lifted by the weaker yen, which makes their goods cheaper and helps their bottom line.

The Nikkei ended the morning 0.9 percent higher, matching the previous day’s rise.

However, traders elsewhere in Asia were more wary following a surge Monday fuelled by easing worries about German financial titan Deutsche Bank.

Hong Kong dipped 0.2 percent and Sydney also shed 0.2 percent, while Singapore was 0.1 percent up and Seoul added 0.6 percent as investors returned from a long weekend break.

Shanghai is closed for a holiday.

The pound fell to $1.2837 from $1.2841 while the euro was at 87.32 pence from 87.30 pence after May at the weekend said Britain will trigger Brexit negotiations by the end of March and her finance minister warned of “turbulence” for the economy.

Sterling fell to a 31-year low $1.2820 on the comments Monday.

– Key figures at 0230 GMT –

Tokyo – Nikkei 225: UP 0.9 percent at 16,744.60 (break)

Hong Kong – Hang Seng: DOWN 0.2 percent at 23,546.07

Shanghai – Composite: Closed for holiday

Euro/pound: UP at 87.32 pence from 87.30 pence Monday

Pound/dollar: DOWN at $1.2837 from $1.2841

Euro/dollar: DOWN at $1.1206 from $1.1211

Dollar/yen: UP at 102.15 yen from 101.63 yen

Oil – Brent North Sea (December): DOWN 19 cents at $50.70

Oil – West Texas Intermediate (November): DOWN 25 cents at $48.56

New York – DOW: DOWN 0.3 percent to 18,253.85 (close)

London – FTSE 100: UP 1.2 percent at 6,983.52 (close)

© 2016 AFP

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