Asian markets mostly down as new year surge fades, dollar bounces
Asian markets saw further losses on Thursday, with Tokyo hit by a weaker dollar and Hong Kong coming off a 12-day surge, as the rally that greeted 2018 gives way to profit-taking.
US traders sent all three of New York’s main indexes falling for the first time this year as they were spooked by a report saying Canadian officials increasingly expect Donald Trump to call time on the decades-old NAFTA free-trade pact.
That came after Bloomberg News said Chinese authorities reviewing foreign-exchange holdings have recommended slowing or halting purchases of US Treasuries.
The greenback sank against most of its peers soon after the news on fears that a huge amount of foreign demand for dollars would dry up.
But it bounced on Thursday after China’s State Administration of Foreign Exchange refuted the report, saying in a statement on its website: “We think this story could be quoting a mistaken source or it could also be a piece of fake news.”
China has long invested heavily in US bonds as a way of controlling the value of its own yuan currency and Bloomberg News estimates it currently holds around $1.2 trillion in Treasuries, an amount that has doubled over the past 10 years.
“US Treasuries are often used during the political ping-pong match when trade tensions escalate,” said Stephen Innes, head of trading for OANDA in the Asia Pacific.
“It’s entirely possible that China could take measure to rebalance their reserve as they have done in the past,” Innes said.
– ‘Improbable’ –
But markets quickly realised “it’s highly improbable China will stop buying US Treasuries”.
Innes added that while the dollar is up against the yen, it is still struggling, “suggesting the market remains on guard against a quicker pace of BoJ tapering”.
The yen was already making inroads against the dollar after the Bank of Japan on Tuesday said it would cut back on its purchasing of bonds as part of its huge stimulus programme.
The stronger yen hurt Tokyo-listed exporters, sending the Nikkei index 0.3 percent down.
Hong Kong was slightly lower after an outstanding 12-day unbeaten run, but Shanghai ended up 0.1 percent, pushing a winning streak to 10 straight days.
Sydney and Seoul each lost 0.5 percent, Singapore eased 0.1 percent and Wellington tumbled 1.4 percent while Manila was also sharply down.
Oil prices were slightly down but remain at near three-year highs after a recent run-up helped by falling US stockpiles and unrest in key producer Iran.
Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers, said: “The passing of the US tax bill has provided the market with an assumption of stronger demand growth over the medium to long-term. We may continue to have a gentle push forward followed by a period of consolidation.”
– Key figures around 0710 GMT –
Tokyo – Nikkei 225: DOWN 0.3 percent at 23,710.43 (close)
Hong Kong – Hang Seng: FLAT at 31,066.57
Shanghai – Composite: UP 0.1 percent at 3,425.34 (close)
Euro/dollar: DOWN at $1.1938 from $1.1953 at 2215 GMT
Pound/dollar: DOWN at $1.3489 from $1.3507
Dollar/yen: UP at 111.84 yen from 111.43 yen
Oil – West Texas Intermediate: DOWN three cents at $63.54 per barrel
Oil – Brent North Sea: DOWN five cents at $69.15 per barrel
New York – DOW: DOWN 0.1 percent at 25,369.13 (close)
London – FTSE 100: UP 0.2 percent at 7,748.51 points (close)