* USD benefits from huge unwind of emerging market,
* Eyes on Asian shares after steep falls on Wall St, Europe
* Market anxiously watching PBOC clamp down in China money
* JPY relatively steady around 97 per dlr, Nikkei futures
By Wayne Cole
SYDNEY, June 21 The U.S. dollar, euro and
sterling were all in demand on Friday as the prospect of an end
to super-easy money from the Federal Reserve drove a mass
migration out of emerging markets and into developed world
Sharply higher Treasury yields and sinking equities also
benefited the U.S. dollar, though more against emerging and
commodity currencies than against its major competitors.
Indeed, against a basket of majors the dollar was off a
shade at 81.693 on Friday, though still up 1.4 percent
for the week. The euro was holding at $1.3236 having
backtracked form Wednesday's $1.3414 highs.
Neither had the dollar made much progress on the yen, which
could turn higher once more should Tokyo shares take a dive as
futures suggest they will. After making a brief top at 98.29 yen
overnight, the dollar was now back at 97.00.
Instead, all the action was on emerging (EM) and
commodity-linked currencies where investors are bailing out of
once popular positions and repatriating the funds.
"The normalization of Fed policy, combined with weaker
commodity prices and a declining growth differential between the
emerging and developed world, makes for a challenging backdrop
for EM in the months ahead," said analysts from Barclays.
When investors unwind emerging market positions the most
liquid cross is into the U.S. dollar, a major reason it has shot
up against currencies from Brazil, to Turkey, South Africa,
Poland and Mexico.
But many of those investors are from Europe or the UK or
Japan and they then exchange those dollars for euros or pounds
or yen, limiting the dollar's advance.
Asian currencies have also been spooked by disappointing
data out of China and an ongoing clamp down on liquidity by the
central bank there.
That in turn has added to fears of slower global growth
which, when combined with a rising U.S. dollar, is poison for
commodity prices and currencies leveraged to them.
Even the sedate Norwegian kronor got blasted on Thursday
suffering its biggest single day loss against the euro in
The Australian dollar sank to its lowest in almost
three years at $0.9163, before finding enough bids to pause at
$0.9195. The hapless Aussie is also being sold as a proxy for
the much less-liquid merging market currencies in Asia and
analysts suspect it is only a matter of time before it tests 90
Still, the fall will suit the Reserve Bank of Australia
(RBA) which has long been agitating for a depreciation to help
boost export competitiveness at home.
New Zealand's dollar came under heavy pressure after
breaking the recent low at $0.7761 to touch $0.7710,
its lowest since June last year.
There are no major data due in Asia leaving dealers to
anxiously watch share markets and developments in China's money
markets. Bank of Japan Governor Kuroda speaks later and will no
doubt try his best to reassure investors that the BOJ remains
committed to all-out easing.