Dollar rises as bets grow Fed will hold fire

Tokyo - The dollar rose against the yen but fell against emerging market currencies on Thursday in Tokyo, as investors bet the US central bank will delay its first interest rate rise in nine years.

The dollar rose to ¥120.77, from ¥120.61 on Wednesday in New York, after the release of disappointing Japanese trade figures, and the euro gained to $1.1291 from $1.1285.

The single currency was also up to ¥136.37 from ¥136.11.

A US rate rise has been a key fear factor for investors who worry it could harm a burgeoning recovery in the world's top economy at a time when concerns about slowing growth in China has kept global markets on edge.

While the Fed is expected to lift rates by year end, rising expectations it will hold fire when it meets on Thursday spurred optimism around the world, driving equities and oil higher and prompting buyers to snatch up riskier currencies.

The Indonesian rupiah, the Taiwan dollar, the Thai baht and the South Korean won gained against the greenback.

"Asian markets are doing well today in cautious positioning ahead of the Fed rates decision, with currency moves in particular reflecting the general feeling that rates will be left unchanged," Angus Nicholson, market analyst at IG in Melbourne, said in a note to clients.

The weakening of the yen also came after data showed Japan's exports slowed for the second straight month in August, dragged lower by weak demand from China's stumbling economy.

The figures also highlight the challenge facing Prime Minister Shinzo Abe as he struggles to reignite growth, the day after Standard & Poor's cut Japan's credit rating, saying the government had little chance of fixing underlying problems.

They will add to pressure on the country's central bank to add more stimulus, although economists remain divided on when the Bank of Japan (BoJ) will expand its unprecedented ¥80trn annual asset-buying programme.

Junko Nishioka, chief economist at Sumitomo Mitsui Bank, told AFP she believes the bank will not act until the end of 2015 or early 2016, as BoJ Governor Haruhiko Kuroda remains bullish about the economy.

"The BoJ may want to wait (to see) how much China and emerging economies are going to affect Japan's economy," she said.

The Australian dollar bought 71.88 US cents Thursday in Tokyo, up from 71.61 cents on Wednesday and well up from the six-year lows of below 69c touched last week.

The Chinese yuan fetched ¥18.96 from ¥18.88.

dhl/cah/psr

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