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Asian Shares Snap Back, Stronger Yen Holds Nikkei Down

Asian Shares Snap Back, Stronger Yen Holds Nikkei Down

David Cottle, Analyst


Talking Points:

  • Asian stock markets posted gains, in most cases staging a comeback from early falls
  • The MSCI Asia/Pacific index hit 17-month highs
  • However, the Nikkei was a notable laggard

Most Asian stock markets recovered smartly from early losses to trade higher in a Thursday session, which saw gold and crude oil prices climb too.

Australia’s ASX 200 benchmark ended the day up 0.2%, with stocks in both mainland China and Hong Kong also higher. The Nikkei was an exception, closing down 0.5%. It looks to have been the victim of a stronger Yen as a key meeting looms between Japanese Prime Minister Shinzo Abe and US President Donald Trump.

However, Morgan Stanley Capital International’s broadest index of Asia/Pacific shares hit its best level since July 2015 with Hong Kong, China and Taiwan among the best performing markets. An ongoing commodity price rally along with Beijing’s “gentle” monetary tightening, via money-market rates, have reportedly seen investor confidence in China and the wider region rise.

On the economic data front Japan’s core machinery orders were revealed to have risen 6.7% on the month in December. This was well above the 3.1% that markets had been expecting, though this series is notoriously volatile and hard to forecast.

As for currency markets, the New Zealand Dollar fell quite sharply, with NZD/USD sliding from 0.72439 to 0.71920 before recovering somewhat. The Reserve Bank of New Zealand left its official cash rate unchanged at its 1.75% record low as it was expected to do. However, in remarks after the policy decision, Governor Graeme Wheeler suggested that the currency ought to be lower than current market pricing, and it was this which did the damage.

Elsewhere in the currency space, the US Dollar Index was firmer, looking ever more comfortable above the 100 level despite having slipped below that psychologically important market earlier this week.

Gold prices ticked up through the session, reportedly on elevated political-risk appetite while crude prices rose thanks to an unexpected drawdown of US gasoline inventories Wednesday. Both Brent and WTI benchmark crude were up around 50 cents a barrel.

We’re well into this young year’s first quarter now. How are DailyFX analysts’ forecasts bearing up? We’ve nowhere to hide.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.