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Categorized | Currencies

Stronger yen, fall in oil weigh on Asian stocks

Posted on November 28, 2016

Stock markets in Asia were mixed on Monday, with a stronger yen in response to a weaker dollar putting Japanese shares under pressure and jeopardising their lengthy winning streak.

Strength in the yen – and other currencies – is as much a function of dollar weakness as anything else, but the Japanese unit grabs the headline today for the size of its move. Up 1.3 per cent at ¥‎111.66 per dollar, the yen is on track for its strongest session since September 21. On Friday, it was threatening to cross ¥‎114.

The yen is now 6.6 per cent weaker this month, spurred by a rally in the US dollar as Donald Trump was elected US president and markets surmised his policies would spur inflation, which may in turn prompt the Federal Reserve to lift interest rates at a faster pace than previously thought. The yen’s drop had also supported an 11-day winning streak for the Topix that stretched to Friday and now looks in jeopardy.

Wall Street’s four main equities gauges staged a “grand slam” and closed at record highs in a half-day of trading on Friday. But the positive mood had not spilled over into Asia today. The stronger yen has helped push Japan’s Topix 0.4 per cent lower, while the Nikkei 225 is down 0.8 per cent. Energy stocks have led Australia’s S&P/ASX 200 0.4 per cent lower.

Hong Kong’s Hang Seng is up 0.5 per cent, while China’s Shanghai Composite is up 0.6 per cent. After market close on Friday, regulators announced a trading link between Hong Kong and China’s tech-focused Shenzhen Composite would go live on December 5. The index was up 0.2 per cent today.

Asian currencies were higher as the US dollar weakened. The yen was the best performer, followed by South Korea’s won, up 0.7 per cent as policymakers said they would take steps to stabilise markets, and the New Zealand dollar, up 0.5 per cent. Emerging markets currencies like Malaysia’s ringgit, the Philippine peso and Indonesian rupiah enjoyed some reprieve today after hitting multi-year lows last week.

Markets are also readying themselves for Wednesday’s Opec meeting in Vienna. Oil prices had been buoyed in the first half of last week by hopes members of the cartel would use this week’s meeting to agree to production cuts that would help address global oversupply.

Investors are still nervous, and in Friday’s half-session following the US Thanksgiving holiday, oil prices fell more than 3 per cent. Brent crude, the international benchmark, was down a further 0.2 per cent at $47.18 a barrel, while West Texas Intermediate was likewise off 0.2 per cent at $45.99.