The dollar extended gains in Asian trade Tuesday as investors swung their attention to expectations of another US interest rate hike next month, but equities struggled under the weight of profit-taking following the previous dayâ€™s rally.
Regional markets surged Monday, with Tokyo and Seoul leading the way, following centrist Emmanuel Macronâ€™s victory in Franceâ€™s presidential election and last weekâ€™s solid US jobs report that reinforced views of a strengthening economy.
The better-than-expected reading on US payrolls preceded a record close on Wall Street and helped send Wall Streetâ€™s VIX index of volatility in New Yorkâ€™s markets to its lowest level since 1993.It also had investors betting the Federal Reserve will stick to its plan to raise borrowing costs twice more this year â€” including once next month â€” having lifted rates in December and March.
The likelihood of further tightening has seen the dollar rally more than four percent since hitting a low around 108.30 yen in mid-April.
Analysts say it could push further following the release of sales and consumer price index figures this week.
â€“ Bulls at the ready â€“
â€śWhile we think the Fed will be resolute on its course towards at least two rate hikes, the market is underpricing the risk that (the central bank) will tighten rates more quickly than expected, so a robust retail sales print and a stronger-than-expected CPI print will be a call to action for dollar bulls,â€ť said Stephen Innes, senior trader at OANDA, in a note.
The greenback was also up against the pound and euro â€” which has run out of steam since pressing higher leading up to the French election â€” and most other high-yielding currencies, including the South Korean won, Indonesian rupiah and Mexican peso.
The Australian dollar was down almost one percent on concerns about fresh figures pointing to a further growth slowdown in key export market China. Traders are also keeping an eye on the annual budget statement out of Canberra later in the day.
Tokyoâ€™s Nikkei ended 0.3 percent lower a day after jumping more than two percent to a 17-month high, while Sydney dropped 0.5 percent, Wellington shed 0.2 percent and Taipei retreated 0.2 percent. Manila, Jakarta and Bangkok also turned lower.
But Shanghai recovered from recent selling pressure to close 0.1 percent higher, while Hong Kong jumped 1.3 percent. Singapore was also slightly up.
Seoul, which ended at a record high Monday, was closed as South Korea held its presidential election.
The tepid performance Tuesday comes despite a record close for the S&P 500 and Nasdaq on Wall Street.
In early European trade London rose 0.1 percent, Paris added 0.4 percent and Frankfurt was up 0.3 percent.
â€“ Key figures around 0820 GMT â€“
Tokyo â€“ Nikkei 225: DOWN 0.3 percent at 19,843.00 (close)
Hong Kong â€“ Hang Seng: UP 1.3 percent at 24,889.03 (close)
Shanghai â€“ Composite: UP 0.1 percent at 3,080.53 (close)
London â€“ FTSE 100: UP 0.1 percent at 7,307.21
Euro/dollar: DOWN at $1.0905 from $1.0926 at 2100 GMT
Pound/dollar: DOWN at $1.2937 from $1.2944
Dollar/yen: UP at 113.46 yen from 113.26 yen
Oil â€“ Brent North Sea: DOWN 10 cents at $49.24 per barrel
Oil â€“ West Texas Intermediate: DOWN nine cents at $46.34
New York â€“ Dow: UP less than 0.1 percent at 21,012.28 (close)