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Yen strengthens as Asia risk aversion picks up

Wednesday 03.10 GMT

Overview

A risk-off sentiment on Wall Street carried over into Asia where bonds gained and the yen firmed, punishing stocks in Tokyo while oil prices continued to climb.

Hot topic

The main action in the region was in foreign exchange markets, where the Japanese currency rose 0.1 per cent against the US dollar to ¥109.49 — its strongest since November 17 — after pushing past the 110 mark in late Tuesday trading on Wall Street as investors flocked to havens.

The Australian dollar dipped below the $0.75 mark, shedding 0.1 per cent against the dollar to $0.7491, near its lowest level this year.

In South Korea the won weakened 0.2 per cent to 1,114.57 per dollar, edging towards a new low for the month in response to rising tensions in the region after the US earlier this week dispatched an aircraft carrier group towards waters near the Korean peninsula in a show of naval power.

The offshore rate for China’s renminbi remained weaker than its onshore rate for a second straight day. The onshore renminbi slipped 0.1 per cent to Rmb6.8977 against the dollar while the offshore rate was unchanged at Rmb6.9025 after snapping a six-day decline on Tuesday.

The US dollar was under pressure more broadly, with the dollar index that tracks the greenback against a basket of global peers falling 0.1 per cent to 100.65.

Equities

Stock markets in the region were mixed, with Tokyo bearing the brunt of a stronger yen. The Topix index was down 1.2 per cent, sporting heavy losses across the board. The energy segment was down 2.1 per cent while financials shed 1.6 per cent.

Toshiba dropped as much as 3.6 per cent a day after warning of “substantial doubt” about its ability to stay in business.

In Sydney the S&P/ASX 200 was flat as a 7 per cent drop for the telecoms sector offset gains elsewhere. Telstra tumbled as much as 7.6 per cent on news rival TPG Telecom was planning a mobile network in Australia.

Hong Kong’s Hang Seng index was off 0.1 per cent, a comparatively minor drop after Tuesday’s 0.7 per cent drop. In China, the Shanghai Composite was down 0.3 per cent.

The S&P 500 ended the New York session down 0.1 per cent, with trading conditions thin ahead of the Easter break.

Fixed income

Government bonds were bolstered by risk aversion permeating the Asia session. The yield on 10-year US Treasuries was down 1 basis point, deepening Tuesday’s 7bp drop.

The 10-year Australian government bond yield was down 4 bps at 2.49 per cent while that on the equivalent Japanese bonds was down 1bp at 0.017 per cent.

Bond yields move in the opposite direction to prices.

Commodities

Oil prices were building on Tuesday’s gains. Brent crude, the international benchmark, was up 0.3 per cent at $56.41 a barrel while the US marker, West Texas Intermediate, rose the same amount to $53.56.

Gold continued to enjoy its haven status, climbing 0.2 per cent to $1,278.01 per ounce.

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