Dollar falls against the yen

Traders shift out of the dollar after the US Federal Reserve’s decision to keep rates at zero.

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Tokyo - The dollar fell against the yen on Friday in Asia after the US Federal Reserve held fire on raising rates, citing concerns about slowing growth in China and a fragile world economy.

Emerging market currencies - which have fallen nearly 20 percent in the past year - edged up in choppy trade, but they are still on course for a rare weekly gain against the dollar.

The dollar fell to 119.76 yen in Friday morning trade in Tokyo, down from 120.01 yen in New York and well down from 120.90 yen in Asia earlier Thursday.

The euro came to $1.1405 compared with $1.1436 in US trade but remains much stronger than the $1.1302 seen Thursday in Tokyo. The single currency bought 136.58 yen in Tokyo, compared with 137.25 in New York.

Traders shifted out of the dollar soon after the Fed decision to keep rates at zero, which came after one of its most highly anticipated meetings in years.

However, nervous investors were also spooked by comments from bank chief Janet Yellen who struck a more downbeat tone than expected about both the health of the US economy, and the outlook for global growth.

“Dollar-selling sentiment emerged following the Fed's decision, but the market still expects a rate hike in the future,” said Yosuke Hosokawa, head of FX sales team at Sumitomo Mitsui Trust Bank.

“Is it actually time to buy back emerging market currencies now? I doubt it,” Hosokawa said.

The decision boosted developing countries' currencies, which have fallen in recent weeks as investors, scared off by stalling Chinese growth, have turned to increasingly lucrative US assets.

In Tokyo trade, the Thai baht edged 0.10 percent higher against the dollar, the Malaysian ringgit was up 0.23 percent, the Indian rupee added 0.64 percent and the South Korean won was 0.04 percent higher.

The Taiwan dollar also rose 0.30 percent, although the Indonesian rupiah fell 0.22 percent and the Philippine peso lost 0.17 percent.

The higher-risk currencies have enjoyed a rally this week as speculation grew that the US central bank would hold off a rate hike. There were fears a rise now could severely hurt emerging economies as investors would likely withdraw more cash to the United States.

However, analysts pointed out the uncertainty of when a rate - still expected before the end of the year - could be as damaging to emerging markets as an actual lift off.

“We need a circuit breaker; hopefully one to the upside, not the downside of the risk spectrum,” said NAB economists in a market note.

The Australian dollar was flat at 71.86 US cents, but well up from the six-year lows of below 69 cents touched last week.

* Bloomberg News contributed to this report

AFP