Dollar strikes six-month high against euro

AFP, Tokyo

The dollar hit a six-month high against the euro in Asia today on speculation that the European Central Bank will start cutting interest rates by early next year to bolster economic growth. The greenback also regained the key 110-yen level after a spike in US consumer price inflation rekindled talk of Federal Reserve interest rate hikes, which could make the dollar more attractive to investors. The euro fell to 1.4745 dollars in Tokyo afternoon trade, down from 1.4824 in New York late on Thursday. The euro gained to 162.73 yen from 162.55. The dollar rose to 110.28 yen from 109.66. News that the eurozone economy contracted 0.2 percent in the second quarter rekindled speculation that the European Central Bank may have to lower borrowing costs to shore up growth, which weighed on the euro. While the ECB is unlikely to move this year, "they will eventually start cutting rates from the early part of next year and that will be a key factor which will contribute to more euro weakness," predicted David Mann, currency strategist at Standard Chartered in Hong Kong. "We probably have seen the top of the euro at 1.60," although the euro was unlikely to tumble below 1.40 dollars in the near future, he said. "We're not convinced that we will see any interest rate hikes in the US this year, which will ultimately disappoint the markets." Talk of rate hikes by the US Federal Reserve resurfaced after US consumer prices rose 0.8 percent in July from the previous month, and at an annualised rate of 5.6 percent, the fastest since January 1991. The month-on-month jump was double market expectations, "raising fears that this could force the Fed to raise interest rates even while the economy was deteriorating," noted National Australia Bank strategist John Kyriakopoulos. The Japanese currency continued to benefit from renewed worries about the health of the global economy, particularly against high-yielding currencies such as the Australian and New Zealand dollars. The yen tends to benefit in times of uncertainty as it is often used to fund risky trades. "At the moment risk aversion is very high," said Mann at Standard Chartered, who thinks the dollar will stay in the 110- 112 yen range in the near term. "But ultimately, more because of US problems, we believe we'll see a move back below 110 to, say, 107 by around the end of the year." Against regional Asian currencies, the dollar rose to 1.4150 Singapore dollars from 1.4086 on Thursday, to 33.77 Thai baht from 33.68 and to 9,190 Indonesian rupiah from 9,183.
Indonesia to push renewable energyAFP, JakartaStung by high oil prices, Indonesia plans to tap more into renewable energies and change course from a "nation that splurges" to one that saves, President Susilo Bambang Yudhoyono said on Friday. "The soaring prices of oil on the global level during these last six years have reminded us of the importance of safeguarding energy security in our homeland," Yudhoyono said in his annual state-of-the-nation address. "We're raising the energy supply capacity through accelerated energy diversification, the utilisation of non-fuel oil alternative energy, including new and renewable energy such as micro-hydro, geothermal and biofuel." Indonesia is Asia's only member of the Organisation of Petroleum Exporting Countries, but Jakarta is planning to pull out of the cartel at the end of the year as falling production has turned it into a net importer. The vast archipelago enjoys some of the lowest domestic fuel prices in the region thanks to generous subsidies, feeding demand for cars and motorbikes while sucking state money away from welfare and infrastructure projects. Yudhoyono's poll ratings ahead of elections next year have suffered since he authorised an average 30-percent domestic fuel price rise in May, but he appeared in no mood Friday to sidestep the energy debate. "In addition (to tapping renewable energies), we must effectively save energy. Thus far, we have been a nation that splurges on the use of energy," he said, adding that he had ordered the creation of an "Energy Saving Tax Force." "The whole of society is ... expected to save, whether in private offices or in households." He said energy savings of 20 percent would free up 17.6 trillion rupiah (1.9 billion dollars) of state funds for other projects.