0201 GMT January 17, 2019
Asian equities regained their footing after some initial softness. Hong Kong led gains following a rare bout of weakness the previous day, and, like Korea’s stock benchmark, is seeking another record high, Reuters reported.
Still, many indexes in the region stuck close to Thursday’s finishing levels. Australian and Indian markets were closed for holidays.
OCBC Bank said, “Asian bourses may tread more cautiously today amid the heightened trade and currency war signals coming out of the US.”
The dollar set a string of three-year lows this week after US Treasury Secretary Steven Mnuchin said a “weaker dollar is good for trade.” That turned around Thursday when Trump said during a CNBC interview at the World Economic Forum in Davos, Switzerland, that “the dollar is going to get stronger and stronger, and ultimately I want to see a strong dollar.”
The WSJ Dollar Index jumped to 83.58 from 82.82 in US afternoon trading. It was recently at 83.30, down 0.2 percent from late New York levels. The dollar JPYUSD, +0.140039 percent fell to ¥108.50 on Thursday, before jumping to ¥109.75; it was at ¥109.38 midday in Asia.
The Nikkei NIK, -0.21 percent , which was up 0.5 percent shortly after the open, traded slightly lower after the midday break in the wake of the dollar’s pullback.
Stephen Innes, head of trading in the Asia Pacific at Oanda, said, a stronger dollar, even if it is only short-term, sparked people to put on more US risk, and I think that’s going to be the flavor of the day for Asia.
The dollar’s rebound sent commodities prices down Thursday afternoon. Oil, which had hit fresh three-year highs, finished New York trading down slightly, while futures fell some 0.5 percent in early Asian trading. But the drop was trimmed to 0.2 percent for the global Brent benchmark as the dollar pulled back.
Gold prices rose slightly in Asia after falling more than one percent during the dollar’s gains.
Even before the dollar’s retreat, analysts were wondering whether the move high could be sustained.
OM Financial private client manager Stuart Ive said, “The trend in place is still US dollar weakness, and we still have a long way to go to break out of that.”
The Hang Seng Index HSI, +1.36 percent was up 1.3 percent by the midday break, driven by a rebound in banking stocks. Morgan Stanley boosted its stock target on a number of Chinese lenders, including China Construction Bank 0939, +4.67 percent and Industrial and Commercial Bank of China 1398, +3.68 percent for reasons including higher earnings forecasts.
The Shanghai Composite Index SHCOMP, +0.43 percent, which includes large-cap companies listed on the mainland as well as the country’s big banks, rose 0.5 percent. The sector has been key in both markets’ persistent gains the past month.