Asia stocks slip, Japan rebounds

Markets in Singapore, Hong Kong and mainland China closed for new year holiday

Asian shares pared losses on Monday as a weaker yen helped Japan's Nikkei snap a four-day losing streak, but trade was thin with many regional markets closed for the Lunar New Year holiday.

Wall Street’s losses on Friday curbed overall sentiment, though S&P 500 E-Mini futures rose about 0.4 per cent as investors focused on signs of strength in a mixed US nonfarm payrolls report released late last week. Financial spreadbetters predicted Britain’s FTSE 100 to open around 0.6 per cent higher, and Germany’s DAX and France’s CAC 40 to each open up about 0.4 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1 per cent, with Australian shares slipping a few points to end nearly flat. But Japan’s Nikkei erased early steep losses as the dollar gained on the yen, and ended up 1.1 percent. With Singapore, Hong Kong and mainland China all closed for the new year holiday, volume was thin.

China, a focus of recent market concern, will be closed for the entire week for the holiday. Data released over the weekend showed China’s foreign reserves fell for a third straight month in January, as the central bank dumped dollars to defend the yuan and prevent an increase in capital outflows. Beijing has been struggling to underpin the yuan, which faces depreciation pressure as China’s growth rate slows to its lowest levels in a quarter of a century. “Just as China’s persistent accumulation of foreign reserves in the first decade of the 21st century signalled that its managed currency was undervalued, its persistent loss of foreign reserves signals that the yuan has become overvalued by market criteria,” economist Bill Adams at PNC Financial Services Group said in a research note. “There is a large probability that China’s central bank tires of spending its foreign reserves to defend an overvalued currency in the near future.

The People’s Bank of China will likely widen the currency’s trading band and permit a larger managed slide against the dollar in coming months.” Also over the weekend, North Korea’s launch of a long-range rocket drew international condemnation.

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In currency markets, the dollar index, which tracks the greenback against a basket of six major rivals, edged up 0.1 per cent to 97.127, well above a nadir of 96.259 plumbed last Thursday, its lowest since October. The dollar rose about 0.5 per cent to 117.42 yen, moving away from Friday’s 2-1/2 week low of 116.285. It slid 3.6 per cent last week, its biggest weekly drop since July 2009.

“What we are seeing today is a correction after overwhelming selling in the dollar we saw last week. It is just unwinding of positions, not fresh bets against the yen,” said Koichi Takamatsu, executive director of forex trading at Nomura Securities.

The euro edged down about 0.2 per cent to $1.1137, though it remained in sight of Friday’s three-month high of $1.1250 scaled immediately after the headline figure of the payrolls data led investors to reduce their bets on further Fed rate hikes. The Australian dollar added 0.5 per cent to $0.7094 after plunging nearly 2 percent against its US counterpart on Friday. Crude oil futures edged higher on hopes that big oil producers will take steps to address the global supply glut that has led to recent steep selloffs.

Saudi Arabia’s oil minister Ali al-Naimi discussed cooperation between OPEC members and other oil producers to stabilise the global oil market with his Venezuelan counterpart on Sunday, according to state news agency SPA. But nothing was decided, so caution kept gains in check. Brent crude added about 0.9 per cent to $34.38 a barrel, while US crude futures also rose about 0.9 per cent to $31.17.

Reuters