By Hiroyuki Kachi
The dollar's upward surge lost momentum during the Asian trading session as investors pondered whether markets had gotten ahead of themselves in pricing in greenback strength following Donald Trump's surprise election victory.
Currencies across Asia were showing more resistance to the dollar's recent strength than in recent sessions. The yen clawed back some ground to Y109.08 after the dollar jumped to a fresh five-month high of Y109.23 overnight.
The WSJ Dollar Index, a measure of the U.S. dollar against a basket of major currencies, was down 0.11% at 90.30. Emerging market currencies such as the Indonesian rupiah and Malaysian ringgit that have been pounded by the dollar's charge, were still down a fraction Wednesday, but well off their lows Friday.
"Over the past few days the markets have seen [China's] yuan hit an eight-year low, the Malaysian ringgit get hammered, and weakness across the entire spectrum of regional currencies," said Greg McKenna, chief market strategist at forex broker AxiTrader. "The big question now is whether or not it's time for a pause in Asian forex, especially yuan weakness, or whether the show has just begun."
Traders in Japan suspect there's still more ground for the dollar to cover before market players back off from their bullishness.
"While I think investors may feel a sense of satisfaction around here [after the recent rally], the continued dollar-buying strength during New York trade overnight also suggests that some investors won't be content until they see Y110," said Shinsuke Sato, head of FX trading group at Sumitomo Mitsui Banking Corp.
The dollar has been on a sharp upward trajectory since the U.S. election as markets price in their expectations of a Trump administration that would boost fiscal spending, stoke inflation and increase government debt. The yield on 10-year U.S. Treasurys has jumped, part of a global selloff of bonds, also helping lift the U.S. currency.
Robust U.S. retail sales data overnight and comments from Federal Reserve Bank of Boston President Eric Rosengren powered the overnight rise in the dollar against the yen, but had less impact on other currency pairs.
Looking ahead, economists at Westpac expect the U.S. dollar to keep gaining despite the temporary let-up.
"The USD rally likely continues into early 2017 assuming Trump continues to sound more mainstream and when more detail on a fiscal stimulus that can pass Congress takes shape," they said.
But other market watchers warned that investors may have been too aggressive in driving the dollar higherso fast.
"We do not find this [pause] surprising as we had said yesterday that fatigue is seen setting in given the huge run up in the recent week," analysts at Maybank said in a note.
In other currency trading, the euro rose to $1.0742 at midday in Asia, compared with $1.0721 late Tuesday. The common currency was at Y117.21 midday from Y117.09.
Interbank Foreign Exchange Rates At 23:50 EST / 0450 GMT
Latest Previous %Chg Daily Daily %Chg
Dollar Rates Close High Low 12/31
USD/JPY Japan 109.06-07 109.20-21 -0.12 109.28 108.80 -9.33
EUR/USD Euro 1.0743-46 1.0721-24 +0.21 1.0761 1.0719 -1.07
GBP/USD U.K. 1.2464-66 1.2453-55 +0.09 1.2482 1.2438 -15.41
USD/CHF Switzerland 0.9998-1.0002 1.0016-20 -0.18 1.0021 0.9984 -0.20
USD/CAD Canada 1.3427-32 1.3445-50-0.13 1.3466 1.3424 -2.96
AUD/USD Australia 0.7548-52 0.7558-62 -0.13 0.7572 0.7540 +3.61
NZD/USD New Zealand 0.7092-98 0.7098-104 -0.08 0.7115 0.7083 +3.83
EUR/JPY Japan 117.17-21 117.07-11 +0.09 117.42 116.82 -10.40
Source: Tullett Prebon
--Kenan Machado and Saurabh Chaturvedi contributed to this article
Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
(END) Dow Jones Newswires
November 16, 2016 00:53 ET (05:53 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.