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Yen Falls to 9-Month Low and Era of Cheap Money Ends in Hong Kong

The US dollar was the best of the majors on Thursday—it broke to a nine-month high versus the yen and forced a retreat in the Australian dollar back to the low $0.72s. In Hong Kong, commercial lending rates have been raised for the first time in twelve years, indicating the beginning of the end for cheap money in the region.

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Against the majors, the US dollar firmed on Thursday, a day after the Federal Reserve announced that US monetary policy was no longer “accommodative.” The dollar weakened versus emerging market currencies.

Against the yen, the dollar burst through the ¥113 handle to its highest level in nine months. When last seen, USD/JPY was on its session highs at ¥113.43.

The greenback’s strength forced the Australian dollar back to the low $0.72s and the euro to a six-day low of $1.1653.

On Thursday, as predicted, the Reserve Bank of New Zealand left interest rates unchanged at 1.75 percent and retained language indicating that the next move in rates could be “up or down.” The New Zealand dollar has lost slightly more than a percent in the past twenty-four hours and trades now at $0.662.

Thursday saw the greenback reverse from a ten-week low against the oil-correlated Norwegian krone. Oil’s September rally has stalled in recent days and consequently so has the krone. After meeting resistance at the Kr8.1 handle, the krone weakened to Kr8.146 to the dollar.

In Hong Kong, the era of cheap money is potentially over following HSBC’s announcement that it will raise its prime lending rate for the first time since 2006. The base lending rate for the bank’s Hong Kong customers will be raised by 12.5 basis points to 5.125 percent, effective from Friday. HSBC’s decision follows Wednesday’s 25-basis point hikes to national benchmark rates by the Hong Kong Monetary Authority and US Federal Reserve.

There has been no more madness this week for the normally-dull Hong Kong dollar. During a mostly-unexplainable five-hour window last Friday, Asia’s fourth largest currency strengthened by 0.6 percent—its largest intraday gain in fifteen years. USD/HKD was steady at the time of this report at levels near HK$7.813, within the middle third of its allowed trading range.

 

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