Business

Cautious optimism over stabilising US dollar

Weaker-than-expected economic data and controversies surrounding the Trump administration have weighed on the greenback this year.

But analysts now expect a more stable outlook for the United States dollar against major Asian currencies in the second half of the year.

In recent days, the greenback regained a bit of the ground it had lost against Asian currencies including the Singdollar since the start of the year, amid optimism over a seemingly stronger US economic outlook.

This comes after the US Federal Reserve raised its benchmark interest rate for the second time in three months last week, in a sign of the central bank's confidence in the stability of the US economy.

The Fed has now raised rates four times since December 2015, after keeping rates at ultra-low levels for years in response to the 2008 global financial crisis.

The greenback has inched up about 0.5 per cent against the Singdollar after the Fed's latest rate hike announcement. One US dollar can now buy S$1.387.

But this comes after the US currency has already weakened about 4.4 per cent against the Singdollar since January when it hit S$1.4505 - its highest level so far this year.

It is a similar story with other major regional currencies.

The US dollar rallied to a three-week high against the Japanese yen after Mr William Dudley, the president and chief executive of the Federal Reserve Bank of New York, said on Monday that US inflation should rise alongside wages, supporting expectations for interest rates to continue rising. - THE STRAITS TIMES

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