TOKYO: The dollar strengthened in Asia Thursday, rallying on comments by the head of the US Federal Reserve that it could begin to scale back its monetary easing programme later this year.
In afternoon Tokyo trade, the greenback climbed to 97.30 yen, up from 96.39 yen in New York late Wednesday.
The euro slipped to $1.3255 from $1.3297 while it bought 129.26 yen from 128.24 yen.
The dollar is likely to resume its upward trend against the yen in the coming weeks, said Daisaku Ueno, chief foreign-exchange strategist at Mitsubishi UFJ Morgan Stanley.
Easing measures tend to weigh on a currency as they flood markets with cash, making it less in demand.
While the Fed's view that the US economy is getting better is not necessarily bad for markets, "it takes time to digest" especially because the stimulus has helped prop up global equity markets, Ueno said.
"Once we pass the earnings season for the quarter ending June and an improvement in US economic indicators is confirmed from July onwards, the dollar is likely to strengthen and the yen is likely to weaken gradually," Ueno told Dow Jones Newswires.
Fed chief Ben Bernanke said Wednesday the bank could begin to wind down its stimulus programme later this year and bring it to a close by mid-2014, signalling a growing confidence in the US economy.
The Fed's policy board kept its $85 billion-a-month quantitative-easing programme locked in place for the meantime, saying unemployment remains high and growth is still being squeezed by government spending cuts.
The news sent bond prices -- which move in the opposite direction to yields -- and stocks down while the dollar climbed sharply.
Tokyo's benchmark Nikkei stock index was down 1.74 percent by the close following sharp falls in New York.
For the euro, market players were watching European manufacturing activity data as well as a bloc finance ministers' meeting in Luxemburg later Thursday.
The dollar was stronger against other Asia-Pacific currencies.
It firmed to 10,085 Indonesian rupiah from 10,050 rupiah on Wednesday, to 31.03 Thai baht from 30.85 baht, and to 59.67 Indian rupees from 58.70 rupees.
At one stage Thursday morning, the Indian currency hit a record low 59.93 to the dollar, passing the 58.98 reached last week in part on growing concern about India's economic weakness.
The greenback also rose to Sg$1.2717 from Sg$1.2593, to 1,145.65 South Korean won from 1,130.59 won, to 43.69 Philippine pesos from 43.15 pesos and to Tw$30.01 from Tw$29.90.
The Australian dollar slipped to 92.54 US cents from 94.93 cents while the Chinese yuan fetched 15.83 yen from 15.53 yen.
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