Asian stocks steady as calm returns but jitters keep dollar firm By Reuters
By Alun John
HONG KONG (Reuters) – Asian shares found some calm on Thursday following this week’s heavy China-driven losses although the dollar sat at a more than one-year high against major peers, upheld by lingering safe-haven demand and expectations for tighter U.S. monetary policy.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.06%, while the lost 0.36% a day after Japan’s ruling party chose softly spoken consensus-builder Fumio Kishida as its new leader and the country’s new prime minister.
On Wednesday, fears about China’s economy due to the worsening power crisis and fears that there will be a slowdown worldwide weighed heavily on Asian shares.
However, the – which measures the U.S. currency against six major currencies – hit its strongest level in nearly 18 months against the yen and in 14 months against the euro. These gains were held in Asian hours and it was at 94.314 when last seen.
Chris Weston from Pepperstone’s Melbourne research office said, “The dollar (is) breaking key levels” and that there wasn’t any resistance. That indicates there is real underlying strength.
It can sometimes become something of a magical currency,” Weston said. He pointed out that the dollar was being supported both by international investors who seek safety and the Fed, which is moving closer to ending its huge asset purchase program.
In addition, “the ongoing U.S. debt ceiling stand‑off could briefly amplify financial market jitters and support the USD in the short-term,” said analysts at CBA in a note.
U.S. legislators continue to fight over funding of the government, but a Friday deadline is set to avoid a shutdown. That would also limit gains in U.S. stocks overnight.
The Asian equity market saw Hong Kong stock markets fall 1%, but were balanced out by an increase of 1.1% in Australia.
After data was published on Thursday, the Chinese blue chip index gained 0.5%. This is after it emerged that China’s services industry experienced expansion in September following COVID-19. Factory activity declined unexpectedly due to high prices for raw materials and continued power outages.
According to Chaoping Zhu (Global Market Strategist at J.P. Morgan Asset Management), “It’s likely that China’s power crisis will continue until the end of 2021” as local governments have been under increasing pressure to meet emission reduction targets for the year.
“Investors might remain cautious on China’s corporate earnings (in the fourth quarter). The volatile global market will continue to weigh down investor sentiment.
The other main drag on investor sentiment in greater China was embattled developer China Evergrande, whose shares swung back and forth, and were last down 2.2%
The company was due to pay interest on a dollar bond on Wednesday, but Reuters reported that some offshore bondholders had not been paid interest by the end of the Asian day.
Overnight, the and the both posted small gains but the dropped 0.24%.
After an unexpected increase in U.S. inventories, oil prices fell further.
was down 0.14% to 78.53 a barrel, dipped 0.03% to $74.81.
Close to the seven-week mark, it traded at $1.731.99 an ounce. This was constrained by a strong Dollar.