The dollar saw volatile trade in Asia Thursday after Moody's ratings agency threatened the United States with a downgrade and as the US Federal Reserve chief indicated further stimulus action was possible.
In choppy trade, the dollar swung above and below its 78.98 yen level from New York late Wednesday. The greenback's volatility was driven by some large-lot purchases from overseas investors, dealers said. At one point both the dollar and euro rose sharply versus the yen before falling back.
The row over US debt took pressure off the euro, which firmed to $1.4198 from $1.4168, and to 112.11 yen from 111.76 yen.
The greenback took a hammering after Moody's on Wednesday placed the United States's triple-A debt rating on a downgrade watch because of rising prospects the US debt limit will not be raised in time to avoid default.
"The review of the US government's bond rating is prompted by the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes," Moody's said.
The action came as US President Barack Obama and Democratic lawmakers and their Republican counterparts held a fourth straight day of talks to try to hammer out an agreement on a deficit-reduction budget.
Republicans are refusing to lift the country's $14.29 trillion debt ceiling without deep government spending cuts, and they reject Democrats' demand that tax increases must be part of any sweeping deficit reduction plan.
With the yen rising on the dollar's woes, markets are monitoring responses from Tokyo concerning the unit's strength as it hovers near its strongest level since spiking to a post-war high following the March 11 earthquake and tsunami.
That move prompted a concerted intervention from Japan and its Group of Seven counterparts.
Japanese Finance Minister Yoshihiko Noda told reporters Thursday: "I think the movement of the currency lacks balance, not representing the economic conditions... I don't want to see it stay in that way."
Comments by Federal Reserve chairman Ben Bernanke also boosted risk appetite, helping fuel the dollar's decline, as he told legislators Wednesday that the Fed was "prepared to respond" if stimulus was needed.
This signalled to some that he was keeping the door open for a third round of quantitative easing. The US central bank in June wound up its $600-billion "QE2" bond purchasing programme to boost the economy with easy liquidity.
"The focus has temporarily shifted from the eurozone debt woes to the US issues. The market will monitor US economic indicators to confirm the state of the economy," said Dai Sato, dealer at Mizuho Corporate Bank.
The New Zealand dollar climbed to hit a record high against the greeback after data showed Thursday the nation's economy grew a better than expected 0.8 percent in the March quarter, despite a deadly earthquake.
The news sent the "kiwi" dollar almost nearly one cent higher against the US unit to around US$0.8506, its highest level since floating 26 years ago.
The dollar was lower against other Asian currencies, falling to Sg$1.2180 from 1.2247 on Wednesday, to 1,058.60 South Korean won from 1,061.95 and to Tw$28.83 from 28.88.
The unit also sagged to 42.93 Philippine pesos from 43.09, to 30.14 Thai baht from 30.26 and to 8,538.75 Indonesian rupiah from 8,558.75.
Via: http://sg.finance.yahoo.com/news/Dollar-volatile-Moody-debt-afpsg-3533908271.html?x=0
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