The dollar hit a three-year low after the US Federal Reserve retained its easy monetary policy stance and signalled ultra-low interest rates would continue in the months to come.

Many Asian currencies touched multi-year highs, even as some of their central banks were spotted buying dollars in the market to curb rapid appreciation. Singapore’s Monetary Authority managed to check its dollar’s rise after the US dollar plunged to a record low of S$1.2246.

The Malaysian ringgit, however, still gained 0.5 per cent to a 14-year high of M$2.97 while the Indonesian rupiah climbed 0.5 per cent to a seven-year peak of Rp8,580. The Philippine peso jumped 0.7 per cent to 42.91 pesos and Taiwan’s dollar gained 0.6 per cent to a 14-year high at T$28.683.

Tracking the dollar’s progress against a basket of major rivals, the dollar index fell to a three-year low of 72.871, undermined also by lacklustre first-quarter US growth data.

“This will continue to drive investors away from currencies with low rates whose central banks are expected to remain on hold, towards currencies with higher rates whose central banks are expected to tighten policy,” said Michael Woolfolk, of BNY-Mellon.

This has driven carry trades – where investors fund purchases of high-yielding assets using low yielding currencies such as the dollar and the Japanese yen. Most notable destinations of these funds are in assets or currencies that have been supported by the commodity boom in recent years.

Hence the outperformance of the Australian dollar, which has benefited from exposure to the metals market. It rose 0.5 per cent to $1.0927, having earlier hit a 29-year high of $1.0947.

The Bank of Japan also kept its main interest rate at close to zero but the yen climbed after deputy governor Kiyohiko Nishimura’s call for an extension to the central bank’s asset purchase scheme was rejected.

The yen climbed 0.7 per cent to Y81.56 against the dollar and gained 0.5 per cent to Y120.85 against the euro. Sterling fell 0.7 per cent to Y135.

Get alerts on Currencies when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article