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Dollar eases after Summers quits Fed race

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(Globalpost/GlobalPost)

The dollar eased in Asia Monday after former US treasury secretary Larry Summers withdrew from the race to become the next Federal Reserve chairman, reducing concerns about an early end to its stimulus programme.

The greenback fetched 98.94 yen in Singapore afternoon trade, compared with 99.39 yen in New York on Friday.

The euro was changing hands at $1.3363, compared with $1.3292, and 132.17 yen against 132.11 yen.

Summers' surprise announcement on Sunday came after weeks of speculation over his bid to succeed Ben Bernanke, but his candidacy was ultimately felled by a lack of support from key senators.

Analysts said the move means the two other top contenders for the post -- vice chair Janet Yellen and former vice chair Donald Kohn -- are the frontrunners.

Both are architects of the Fed's quantitative easing (QE) programme and supporters of the approach laid out by Bernanke, while Summers was considered more hawkish towards the bank's $85 billion-a-month bond buying policy.

"The dollar weakened after the announcement as Dr. Janet Yellen is seen as more QE friendly," Kelly Teoh, market strategist at IG Markets in Singapore, said in a note.

DBS Bank said in a market commentary that traders sold the dollar as a "knee-jerk reaction" to Summers' withdrawal.

"Summers is considered hawkish, and Yellen dovish," DBS said.

"He (Summers) is seen hiking short-term rates sooner than later, and hence, viewed as more unfriendly for bond and emerging markets."

Attention is this week on the Fed's next policy meeting and its plans for QE. With economists betting it will announce a reduction of its purchases, the key issue is how quickly and by how much it will "taper".

"The impact on the dollar will be the statement of the (policy committee's) view on the US economy, when they decide to start tapering and to what extent this month, and what we should expect going forward," Teoh said.

The dollar was mostly lower against other Asia-Pacific currencies.

The US unit weakened to Sg$1.2620 from Sg$1.2695 on Friday, to 31.68 Thai baht from 31.83 bhat and to Tw$29.63 from Tw$29.71.

The dollar also slipped to 11,121 Indonesian rupiah from 11,304 rupiah, to 1,083 South Korean won from 1,086 won, to 62.64 Indian rupees from 63.78 rupees, and to 43.70 Philippine pesos from 43.85 pesos on Friday.

The Australian dollar edged higher to 93.29 US cents from 92.43 cents, while the Chinese yuan fetched 16.17 yen from 16.28 yen.

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http://www.globalpost.com/dispatch/news/afp/130916/dollar-eases-after-summers-quits-fed-race