HONG KONG, Jul 2 (AFP): Asian currencies gained ground against the dollar last week after the US Federal Reserve hinted it may soon put an end to two years of interest rate hikes.
JAPANESE YEN: The yen rose against the dollar after the US Federal Reserve signaled it may soon halt its rate-rising cycle, dealers said.
The Japanese currency stood at 114.90 to the dollar late Friday, compared with 116.04 to the dollar a week earlier.
The Fed hiked its federal funds rate by a quarter point Thursday, as expected, to 5.25 per cent, and issued a policy statement that seemed to indicate its two-year rate-hiking cycle was nearly over.
The Federal Open Market Committee (FOMC) toned down the risks of inflation, even while the economy appears to be cooling down.
"The Fed statement turned out to be less hawkish than the market had expected," said Kikuko Takeda, currency research manager at Bank of Tokyo-Mitsubishi UFJ.
"The market reacted by selling the dollar as it had previously priced in the risk of sharper interest rate hikes because of inflation worries," Takeda said.
"The market view is that there may be one more rate rise, either in August or September to 5.5 per cent, so the dollar's fall has been limited to around the 115-yen level," she said.
The yen's gain, however, was limited amid growing calls for the resignation of Bank of Japan governor Toshihiko Fukui over his investment in the fund of Yoshiaki Murakami, who has been indicted for alleged insider trading.
"Overseas markets reacted to the news reports on Fukui but I don't think he would resign his post," said Yoshihiro Nomura, forex team manager at Trust and Custody Services Bank.
"If he steps down over such issues, it would affect the BoJ's credibility," Nomura said.