HONG KONG- 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 US monetary policy.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.06 percent, while the Nikkei lost 0.36 percent 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.
Worries about economic growth in China due to a worsening power crunch combined with fears of a global slowdown, hitting Asian shares on Wednesday.
However, the dollar index – which measures the US currency against six major currencies – hit its strongest level in nearly 18 months against the yen and in 14 months against the euro. It held these gains in Asian hours, and was last at 94.314.
“(The dollar) is breaking key levels and there was no real resistance to the break so that tells you there was real underlying strength to that,” said Chris Weston, head of research at Melbourne brokerage Pepperstone.
“Sometimes, it can become somewhat of a magical currency,” he said, pointing to the fact that it was supported by both global investors seeking safety and the Fed inching closer to reducing its massive asset purchases.
In addition, “the ongoing US 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.
US lawmakers continue to wrangle over funding the government but face a Friday deadline to prevent a shutdown approached, something that also capped gains in US equities overnight.
In Asian equity markets, Hong Kong stocks fell 1 percent but these were largely balanced by a 1.1 percent rise in Australia. – Reuters
