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Asia shares weighed down by weakening dollar

Thursday 02.50 GMT

Overview

A weakening dollar hit Asia-Pacific stocks on Thursday as government bonds in the region were bolstered by risk-off trading, hitting levels not seen since after the November US election, while oil prices deteriorated.

Hot topic

The dollar index sank another 0.7 per cent in Asia trading, bringing the greenback down 1.1 per cent for the week, after Donald Trump said the dollar was “getting too strong” in an interview published on Wednesday.

The drop was obvious throughout the region, with Japan’s yen firming 0.2 per cent to ¥108.82 per dollar, taking it 0.7 per cent stronger over the past two sessions.

The Australian dollar shot higher following the morning release of solid jobs data, notching a rise of 0.7 per cent to $0.7569 and bringing the currency’s gains against the dollar to 0.9 per cent since Thursday’s close.

South Korea’s won was also gaining steam after Wednesday trading saw it snap six days of softening against the greenback. The currency was 0.5 per cent firmer at Won1,136.35 per dollar, or 0.8 per cent stronger over two days.

Equities

The dollar drove Asia-Pacific stock trades on Thursday, battering most of the region’s bourses as local currencies gained on the greenback.

In Sydney the S&P/ASX 200 index was down 0.7 per cent, led lower by a 2.8 per cent drop in the materials sector and a fall of 1.8 per cent in energy stocks.

Tokyo’s Topix was by far the hardest hit, down 1.1 per cent with losses in almost every segment as the yen strengthened. As in Australia, energy and materials stocks were the worst off, falling 2.9 per cent and 1.8 per cent respectively.

In Hong Kong the local currency’s dollar peg did few favours for local stocks, as the benchmark Hang Seng index dropped 0.3 per cent with losses across the board. Worst off were consumer discretionary and information technology stocks, each down 0.7 per cent.

Fixed income

Sovereign bonds were once again enjoying haven status as yield, which moves inversely to price, fell to the lowest levels since shortly after the US election for multiple notes.

Yield on 10-year Japanese government bonds was down 2bp at 0.004 per cent, pulling back slightly after dipping to the lowest level since November 17. That of the 10-year Australian government bond dropped 5bp to 2.45 per cent, touching the lowest level since November 10.

South Korean government bonds were also bolstered, with yield dropping 3bp to 2.168 per cent.

The yield on 10-year US Treasuries was down 1bp at 2.23 per cent.

Commodities

Crude oil prices were suffering in Asia-Pacific trading after giving up gains late in the day on Wednesday.

Brent crude, the international benchmark, shed 0.3 per cent to $55.71 a barrel. The US marker West Texas Intermediate was off by the same amount at $52.94.

Gold was holding steady after rallying the previous session, virtually flat at $1,286.86.

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