March 11, 2014
Fretting over the Fed; yen takes a dive
Asian markets are likely to stay under pressure on Friday as investors fret over the outlook for US policy stimulus, though Japanese stocks could draw comfort from a reversal in the yen against the dollar.
An upbeat reading on US retail sales heightened speculation the Federal Reserve might start trimming its asset buying as early as next week, and saw analysts boost forecasts for economic growth this quarter.
Wall Street reacted by shoving the Dow down 0.66 percent and the S&P 500 down 0.38 percent. At the same time, yields on 10-year Treasury debt popped back up to 2.88 percent and gave the US dollar a lift.
The rise in bond yields helped the dollar recoup all the losses suffered early in the week to touch a seven-month peak at 103.43. Dealers said there were massive stop-loss orders to buy dollars for yen around 103.50, and a break there could unleash a sharp move higher.
The euro also gained on the yen to reach a five-year top at 142.25 yen. The single currency took a breather against the dollar, easing a touch to $1.3751.
Nikkei futures bounced to a premium over the cash market, offering a chance the Nikkei could stabilise after three straight sessions of losses.
However, other share markets in Asia are likely to take their lead from Wall Street and remain on the defensive. MSCI's broadest index of Asia-Pacific shares outside Japan lost 1.1 percent.
Indonesia's rupiah hit a near five-year low of 12,040 per dollar, while the Malaysian ringgit and the Indian rupee also lost ground.
Another casualty was the Australian dollar, which sank a US cent to $0.8930 after the head of the country's central bank reiterated his desire for a lower currency.
In commodity markets, the higher US dollar weighed on gold. It skidded to $1,202.10 an ounce, away from the week's top at $1,267.26 and the lowest since the end of June.
Brent oil futures fell below $109 a barrel on the possible reopening of major Libyan ports this weekend and expectations that the Fed may soon start unwinding its stimulus.
Brent crude oil fell $1.11 to $108.59 a barrel. In contrast, US crude futures for January delivery were up 6 cents at $97.50 a barrel.