* USD gains from huge unwind in emerging mkt, commodities
* Yen, Swiss franc may gain on more emerging mkt turbulence
* Eyes on Asian FX, shares after falls on Wall St, Europe
* Mkt anxiously watches PBOC clampdown in China money mkts
By Hideyuki Sano
TOKYO, June 21 The U.S. dollar stepped back from
a two-week high against a basket of developed world currencies
but is seen on solid footing on expectations of an eventual end
to super-easy U.S. monetary policy.
There are big concerns, however, that higher U.S. interest
rates could prompt a mass migration out of emerging markets. If
that trend intensifies, it could favour traditional safe-haven
currencies such as the yen and the Swiss franc, market players
"It's become clear the Fed is heading for an exit from
stimulus. The era of 'Bernanke puts' is over. Those who are
doing dollar-carry trades and buying emerging market assets have
to unwind their positions," said Mitsuru Saito, chief economist
at Tokai Tokyo Securities.
Against a basket of major currencies the dollar was off a
shade at 81.767, below Thursday's two-week high of
82.145, though it was still up 1.7 percent for the week.
The euro was holding steady at $1.3234, having
backtracked form Wednesday's four-month peak of $1.3414.
The dollar gained 0.6 percent against the yen to 97.82 yen
in choppy trade, edging near its 98.29 yen top hit on
Thursday, as Japanese share prices rebounded.
Yet, most other regional shares were soft and Asian
currencies remained under pressure, keeping the focus on
emerging markets, where investors are bailing out of
once popular positions and repatriating the funds.
"The normalisation 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, the UK or
Japan and they then exchange those dollars for euros or pounds
or yen, limiting the dollar's advance.
That also suggests these currencies could be driven by
unwinding of existing positions, rather than fresh bets based on
economic fundamentals, making their trading unpredictable.
"Price adjustments in emerging markets are quite
outstanding. The markets may trade on this theme for now,
perhaps until early next month," said Takako Masai, forex
manager at Shinsei Bank.
"My guess is the dollar/yen won't have a convincing trend
for the time being. It will be stuck in 95-100 range," she
Asian currencies have also been spooked by disappointing
data out of China and an ongoing clampdown 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.
"Brazil and Turkey are hit by street protests. Asian growth
seems to be slowing. At the moment, I can't see why money should
return to emerging markets," said a trader at a U.S. bank.
Turmoil in Chinese money markets also continued, but fears
of a broader banking crisis eased on speculation the central
bank had quietly added funds to the market.
That helped to lift the Australian dollar from a 33-month
low hit on Thursday, though the currency was still headed for
its worst week in more than a year.
The Australian dollar rose 0.3 percent from late U.S. levels
to $0.9235, after having sunk to $0.9163 on Thursday.