LONDON: The U.S. dollar scored multi-year highs against the euro and yen in Asia on Tuesday amid starkly diverging outlooks for interest rates globally, while currencies from emerging markets came under mounting pressure from risk aversion.
The skittish mood spread to Asian stocks as MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.6 percent.
Driving the dollar was speculation the Federal Reserve would start lifting interest rates from mid-year, while central banks in the European Union and Japan were busy easing policy by buying billions in government bonds.
The European Central Bank began its trillion-euro bond buying campaign on Monday, nudging down yields in Germany and other core EU sovereigns.
Selling in the euro gathered pace through the Asian session as a break of $1.0822 triggered stop-loss offers and took it as deep as $1.0785, the lowest since September 2003. Bears are now eyeing a major layer of chart support at $1.0762.The dollar also broke higher on the yen to reach 122.02, territory not visited since July 2007.
The prospect of rising U.S. yields threatened to attract funds from emerging markets, causing strains from Brazil to Turkey. The Brazilian real led the rout, having fallen for the sixth straight session on Monday.
