"The win for Move Forward and Pheu Thai did not upset expectations, and underpins economic optimism about private sector revival." <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Kevin Buckland; Editing by Jamie Freed and Jacqueline Wong)
By Kevin Buckland
TOKYO, May 15 (Reuters) - The U.S. dollar rose to a
five-week high against major peers on Monday, buoyed by
inflation worries at home and growth concerns globally, though
its gains were capped by anticipation the Federal Reserve will
cut rates later this year.
The Turkish lira sank to a two-month low after weekend
elections looked headed for a runoff, while the Thai baht
rallied almost 1% after Thailand's opposition routed
military-allied parties also in weekend polls.
The greenback got support from higher Treasury yields after
a survey of U.S. consumers' long-term inflation expectations
jumped to the highest since 2011, putting a possible Fed rate
hike next month back in play, with traders laying down those
odds at 11.5%. Worries over a debt-ceiling standoff on raising the U.S.
government's $31.4 trillion borrowing limit also lent some
support to the safe-haven dollar.
"Now that the Fed is sort of out of the way, inflation in
the U.S. has come in softer than expected. I think markets are
pretty much more (comfortable) with the Fed outlook. Now the
focus is on the debt ceiling and when the 'X-date' is, and
whether or not they could potentially get into a situation of
shutdown," said Khoon Goh, head of Asia research at ANZ.
However, rate cuts are still being priced into the market
beginning July through to the year-end, on expectations that
policymakers would ease credit conditions in the United States
following a rout in shares of regional U.S. lenders, which was
triggered by the collapse of Silicon Valley Bank in March.
That limited the dollar's gains, which gave rise to a 0.19%
increase in the euro to $1.08695, after the common
currency dipped to a five-week low of $1.08445 earlier in the
session.
Sterling edged 0.2% higher to $1.24725.
The Aussie rose 0.62% to $0.6683, while the kiwi gained 0.45% to $0.6219.
"If you remove the uncertainty around the debt ceiling
situation, the sentiment has been turning bearish against the
dollar," Goh said.
In Asia, China is at the centre of renewed worries about a
global recession after a spate of disappointing economic data,
including imports and inflation, pointed to tepid domestic
demand. More evidence could come from Tuesday's retail sales
report.
The Chinese yuan dipped to a fresh two-month low of 6.9749
per dollar in offshore trading on Monday before
slightly paring losses to 6.9633.
The People's Bank of China kept its seven-day reverse repo
rate unchanged at 2% on Monday.
The dollar index , which measures the currency against
six major peers, reached 102.75 for the first time since April
10 in early Asian trading, though later eased 0.11% to 102.58.
The index rallied 1.4% last week.
The 10-year Treasury yield was little changed in
Tokyo, hovering around 3.485%.
That kept pressure on the yen, which tends to move inversely
to U.S. long-term yields. The Japanese currency dipped as low as
136.27 per dollar, and was last about 0.3% lower at 136.17 per
dollar.
The dollar was last up 0.28% at 19.635 Turkish lira after earlier jumping to 19.70 for the first time
since March 10.
Turkey headed for a runoff vote after President Tayyip
Erdogan outperformed projections, holding a sizable lead over
his rival but falling short of an outright majority.
The U.S. currency sank 0.72% to 33.735 baht in
onshore Thai trading, and earlier dipped as much as 0.92%.
Thailand's opposition parties secured a stunning election
win on Sunday, but it was far from certain whether they will
form the next government, with parliamentary rules written by
the military junta.
"It appears that the political stability implied in the
'Goldilocks' outcome may be fuelling the (Thai baht) rally,"
said Vishnu Varathan, head of economics and strategy at Mizuho
Bank.
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