Currencies in focus as Obama tours Asia

SYDNEY – A rare rally in the US dollar was the focus in Asia on Friday as investors wondered if President Barack Obama’s nine-day visit to the region would generate pressure on some countries to let their currencies rise.

The bounce in the long-suffering dollar added to profit-taking in commodities such as gold and oil, while weakness in shares across Asia supported the dollar as a safe-haven trade.European shares also looked set to open lower as investors awaited French and German GDP figures.Obama kicked off his first official tour of Asia by meeting Japanese Prime Minister Yukio Hatoyama on Friday, from where he would travel to Singapore, China and South Korea.High on the agenda will be US calls for Asian countries to do more to stimulate domestic demand instead of relying on exports to America. That would likely require much of Asia, and China in particular, to let their currencies appreciate.But there’s an inherent contradiction in the US stance.Treasury Secretary Timothy Geithner often states his desire to see a strong dollar, yet at the same time wants Asian exporters to let their currencies gain ground against the dollar.Asked about yuan flexibility, Thai finance minister Korn Chatikavanij sounded reluctant to press the US case.’From our perspective, what is most important is that China’s economy remains robust – we therefore should respect their economic policies, including the exchange rate policy, not least since it has delivered desired results – to the benefit of the global economy,’ he said in a Reuters Messaging chat room.Leaders of the Asia Pacific Economic Co-operation grouping had seemed to give ground last week by backing undefined ‘market-oriented’ exchange rates. Yet many of the same countries have been spotted intervening to buy dollars to stop a rise in their own currencies that could make exports less competitive and impede their economic recoveries.Traders said this burst of buying caught many speculators short and was a major reason the US dollar bounced so far.The dollar’s rise overnight added to pressure on oil, already burdened by a surprisingly large increase in US crude inventories. US crude oil futures for December delivery were off seven cents at US$76,87, after shedding three per cent on Thursday.Likewise, spot gold was dragged down to US$1 105,30 per ounce from a record peak of US$1 122,85 on Thursday.- Nampa-Reuters