Dollar firms on Fed rate hike talk, eyes on Trump

Comments from two Federal Reserve presidents has fuelled talk of an interest rate hike, boosting the dollar AFP/PAUL J. RICHARDS

The greenback's rally provided fresh impetus for Tokyo stocks, but regional equity markets were subdued despite forecast-beating readings on Chinese factory activity and Australian growth.

In Washington, President Trump's much-anticipated address to both houses of Congress was short on detail but provided enough to keep traders mainly upbeat.

The tycoon pledged US$1 trillion in public-private infrastructure spending and "massive" tax cuts for the middle class, but he did not say how any of it would be paid for.

Ryuta Otsuka, a strategist at Toyo Securities in Tokyo, told Bloomberg News: "Investors are feeling relieved. Focus is shifting toward the Fed."

And while Jeffrey Halley, senior market analyst at forex firm OANDA, said in a commentary that the address was "high on rhetoric and light on detail" and "a highly scripted damp squib", he added that "it has become a case of no news is ever so slightly good news".

But Greg McKenna, chief market strategist at CFD and FX provider AxiTrader, said in a note: "It was a bit of a disappointment in the sense that he did not put any more meat on the bones" of past promises.

Global markets have surged since Trump's November election victory on expectations his plans for infrastructure spending and tax cuts would fire up the world's top economy.

However, his lack of clarity in recent weeks has led to some uncertainty, while there are also concerns the presidency has been enveloped with controversy that has caused division in the country.

The Nikkei in Tokyo ended 1.4 per cent up as the dollar strengthened against the yen after the speech, helping exporters.

Investors were already shifting into the US unit after New York Fed president William Dudley said there was a strong case for borrowing costs to rise, while his San Francisco counterpart John Williams expects such a move to get "serious consideration" when the bank meets this month. Fed boss Janet Yellen is due to speak Friday.

Hong Kong was up 0.2 per cent while Shanghai ended 0.2 per cent higher and Singapore put on 0.7 per cent.

However, Wellington, Taipei, Manila and Jakarta all turned lower.

And Sydney ended down 0.1 per cent as traders brushed off news Australian growth hit 1.1 per cent in the October-December quarter, averting a technical recession of two-straight quarters of contraction, thanks to a pick-up in exports and household spending.

There was little reaction to Chinese figures showing manufacturing activity grew more than expected last month.

The improvement in the purchasing managers index follows a series of upbeat readings from Beijing that suggest the world's number two economy may have turned a corner after years of slowing growth.

In early European trade London added 0.5 per cent, Frankfurt jumped 0.7 per cent and Paris was 0.1 per cent higher.

KEY FIGURES AROUND 0800 GMT

Tokyo - Nikkei 225: UP 1.4 per cent at 19,393.54 (close)

Hong Kong - Hang Seng: UP 0.2 per cent at 23,776.49 (close)

Shanghai - Composite: UP 0.2 per cent at 3,246.93 (close)

London - FTSE 100: UP 0.5 per cent at 7,297.73

Euro/dollar: DOWN at US$1.0540 from US$1.0579

Pound/dollar: DOWN at US$1.2365 from US$1.2381

Dollar/yen: UP at 113.51 yen from 112.75 yen

Oil - West Texas Intermediate: DOWN two cent at US$53.99 per barrel

Oil - Brent North Sea: UP three cents at US$56.54

New York - Dow: DOWN 0.1 per cent at 20,812.24 (close)