Dollar rises in Asia despite Japan rate hike

The U.S. dollar rose in Asia on Thursday despite the Bank of Japan's decision a day earlier to raise interest rates, a move that generally lifts a nation's currency.

Photo: Dollar rises in Asia despite Japan rate hike

The dollar was trading at 121.01 yen at mid afternoon, up from 120.88 yen late Wednesday in New York. The euro fell to US$1.3129 from US$1.3143, and hit a fresh record high of 159.13 yen against the yen.

The Bank of Japan raised Japan's key lending rate, the unsecured overnight call rate, to 0.50 percent from 0.25 percent Wednesday.

But Japanese interest rates still remain so low compared to those in the U.S. and Europe that the widely expected rise in the yen failed to happen.

"When there are few-to-no fresh cues, players trade currencies based upon interest-rate differentials," said Toru Umemoto, chief foreign-exchange strategist with Barclays Bank in Tokyo.

The market now doesn't expect another rate hike for at least a few months, and analysts predict the European unit to head for 163 yen by the end of the month.

"Hopes for high yields in Europe are still solid," said Yuichiro Harada, a senior trader at Mizuho Corporate Bank, reports AP.

The dollar was mostly higher against other regional currencies, climbing to 48.26-28 Philippine pesos from 47.980 the previous session, to 44.262 Indian rupees from 44.01, and to 939.1 South Korean won from 938.4.