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Asia dips as Japan outperforms, dollar close to highs

Published 04/11/2014, 06:08
© Reuters An employee of the Tokyo Stock Exchange stretches at the bourse in Tokyo

By Shinichi Saoshiro

TOKYO (Reuters) - Asian stocks dipped on Tuesday with latest signs of slower growth in China and the euro zone dampening the mood, although Japan bucked the trend and rose to new seven-year highs on follow-through momentum generated by the Bank of Japan's surprise stimulus move last week.

Spreadbetters expected an effectively flat open for Britain's FTSE, Germany's DAX and France's CAC after Wall Street's surge halted overnight.

The dollar took a breather following a BOJ-inspired surge but still remained near multi-year highs against the yen and euro after the BOJ's shock move raised expectations the ECB will eventually have to adopt quantitative easing, even if not at its meeting on Thursday.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent.

Tokyo's Nikkei was up 3.2 percent after advancing to a peak last touched in October 2007, boosted by the yen's continuing weakness. Japanese financial markets were closed on Monday for a public holiday.

The dollar edged down 0.5 percent to 113.46 yen on profit-taking after scaling a seven-year high of 114.21.

"Investors who missed the initial move are positioning themselves for the next lurch higher," said Raiko Shareef, currency strategist at Bank of New Zealand.

The euro was up 0.3 percent at $1.2521 after falling to a two-year trough of $1.2390 overnight.

Repercussions from the yen's broad depreciation were felt in South Korea, where exporters extended losses on worries that a softer Japanese currency would erode their price competitiveness relative to their Japanese rivals. South Korean shares were down 0.9 percent.

The Australian dollar was up 0.5 percent at $0.8724 as the U.S. dollar gave back some ground against its peers. Overall reaction to the Reserve Bank of Australia's widely anticipated decision to leave rates unchanged was limited. The central bank refrained from stepping up its warnings about a strong currency, which lifted the Aussie slightly.

The antipodean currency still remained within reach of a four-year low of $0.8642 reached last month, and persistent worries about slowing economic growth in major export partner China, where data on Monday showed manufacturing activity hit a five-month low, is likely to keep it on the defensive.

The weak Chinese data, coupled with downbeat euro zone manufacturing PMI numbers, highlighted the contrast in fortunes between the much of the world and the United States, which showed an unexpected acceleration in manufacturing activity in October.

In commodities, crude oil extended losses after tumbling as much as $2 a barrel overnight after Saudi Arabia deepened price cuts for U.S. customers. Concerns about Chinese and euro zone growth remain bearish themes for the commodity.

U.S. crude fell to as much as $78.02 (48.76 pounds) a barrel, its lowest since June 2012.

The Malaysian ringgit was near a nine-month low against the dollar on worries over lower oil prices hurting the country's economic fundamentals.

It recovered some of its losses, with the central bank suspected of intervening to support the currency, though that gave investors a chance to unload the ringgit.

© Reuters. An employee of the Tokyo Stock Exchange stretches at the bourse in Tokyo

"We cannot fight the USD. We have U.S. jobs data this week, which is another USD positive factor," said a senior Malaysian bank trader in Kuala Lumpur.

(Additional reporting by Ian Chua in Sydney and Jongwoo Cheon in Singapore; Editing by Eric Meijer)

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