Asian stocks mixed as dollar edges higher
Wednesday, 20 October 2010
HONG KONG, Oct 19 (Reuters): The US dollar edged higher for a third consecutive day Tuesday, driven by traders continuing to take profits on gains in other currencies, while weakness in the technology and commodity sectors limited gains in Asian stocks.
Major European stocks opened weaker, with Britain's FTSE 100, France's CAC 40 and Germany's DAX all down 0.2 per cent. The FTSEurofirst 300 fell 0.1 per cent.
The dollar also found support after US Treasury Secretary Timothy Geithner affirmed the government's desire for a strong currency for the first time since February, providing a reason for dealers to take profits on other currencies' strength in the run up to weekend meetings of Group of Twenty (G20) finance ministers.
However, deep-seated concerns remained among global policymakers that the Federal Reserve's path to quantitative easing would keep the dollar weak and maintain sharp upward pressure on the currencies of other economies, especially in the emerging markets.
That means that despite the likelihood of the dollar strengthening even further in the next few days, the popular trade of selling dollars to buy emerging market equities and commodities is still in play.
"The reasons for the dollar being weaker, principally that move toward QE, are still very valid, so any pullbacks are not going to be enormous," said Gregg Gibbs, currency strategist with Royal Bank of Scotland in Sydney.
The euro was at $1.3900, down 0.3 per cent from late in New York Monday.
The euro has been unable to maintain a foothold above $1.40 in October, which may cause more frustrated traders to turn tail and sell it off to $1.3775 over the next few days.
The US dollar index, which measures performance against a basket of six other major currencies, was up 0.4 per cent, though still not far from a 2010 low hit last Friday.
Stock exchanges in Asia reflected mixed sentiment, with gains in Japan and Hong Kong and declines in tech-heavy South Korea and Taiwan.
Technology stocks were under pressure after Apple Inc posted disappointing sales of its iPad tablet computer, drawing a pointed response from the company's chief executive Steve Jobs, who lashed out at competitors.
Shares of Samsung Electronics, the world's top memory chipmaker, fell 1.3 per cent, underperforming the broader South Korean market.
Japan's Nikkei share average closed 0.4 per cent higher, extending a gain since September to 6.9 per cent, which was below the 9.7 per cent returns from the US S&P 500 index but above the 3.1 per cent from the FTSEurofirst 300 index.
The MSCI index of Asia Pacific stocks outside Japan slipped 0.3 per cent, with weakness in the tech and materials sectors overcoming gains in the utilities and energy segments.
With the dollar at bay, gold also was under wraps, holding at $1,366.30 an ounce, well below the all-time high of $1,387.10 an ounce hit last Thursday.
Gold is still in a bullish trend but in the near term risks a profit-taking driven pullback to $1,361 an ounce.
"Unless the Fed announces quantitative easing to a huge extent, gold will retrace," said Zhu Yilin, general manager of the research and development department of Jingyi Futures in Shanghai.
"It's all about buying the anticipation. Once the result is out, it's time to close positions."
Oil prices slid as the dollar made a comeback and unraveled currency-related trades. US crude for November was down 0.3 per cent to $82.80 a barrel, having been unable to clear $84 after three tries in October.
Major European stocks opened weaker, with Britain's FTSE 100, France's CAC 40 and Germany's DAX all down 0.2 per cent. The FTSEurofirst 300 fell 0.1 per cent.
The dollar also found support after US Treasury Secretary Timothy Geithner affirmed the government's desire for a strong currency for the first time since February, providing a reason for dealers to take profits on other currencies' strength in the run up to weekend meetings of Group of Twenty (G20) finance ministers.
However, deep-seated concerns remained among global policymakers that the Federal Reserve's path to quantitative easing would keep the dollar weak and maintain sharp upward pressure on the currencies of other economies, especially in the emerging markets.
That means that despite the likelihood of the dollar strengthening even further in the next few days, the popular trade of selling dollars to buy emerging market equities and commodities is still in play.
"The reasons for the dollar being weaker, principally that move toward QE, are still very valid, so any pullbacks are not going to be enormous," said Gregg Gibbs, currency strategist with Royal Bank of Scotland in Sydney.
The euro was at $1.3900, down 0.3 per cent from late in New York Monday.
The euro has been unable to maintain a foothold above $1.40 in October, which may cause more frustrated traders to turn tail and sell it off to $1.3775 over the next few days.
The US dollar index, which measures performance against a basket of six other major currencies, was up 0.4 per cent, though still not far from a 2010 low hit last Friday.
Stock exchanges in Asia reflected mixed sentiment, with gains in Japan and Hong Kong and declines in tech-heavy South Korea and Taiwan.
Technology stocks were under pressure after Apple Inc posted disappointing sales of its iPad tablet computer, drawing a pointed response from the company's chief executive Steve Jobs, who lashed out at competitors.
Shares of Samsung Electronics, the world's top memory chipmaker, fell 1.3 per cent, underperforming the broader South Korean market.
Japan's Nikkei share average closed 0.4 per cent higher, extending a gain since September to 6.9 per cent, which was below the 9.7 per cent returns from the US S&P 500 index but above the 3.1 per cent from the FTSEurofirst 300 index.
The MSCI index of Asia Pacific stocks outside Japan slipped 0.3 per cent, with weakness in the tech and materials sectors overcoming gains in the utilities and energy segments.
With the dollar at bay, gold also was under wraps, holding at $1,366.30 an ounce, well below the all-time high of $1,387.10 an ounce hit last Thursday.
Gold is still in a bullish trend but in the near term risks a profit-taking driven pullback to $1,361 an ounce.
"Unless the Fed announces quantitative easing to a huge extent, gold will retrace," said Zhu Yilin, general manager of the research and development department of Jingyi Futures in Shanghai.
"It's all about buying the anticipation. Once the result is out, it's time to close positions."
Oil prices slid as the dollar made a comeback and unraveled currency-related trades. US crude for November was down 0.3 per cent to $82.80 a barrel, having been unable to clear $84 after three tries in October.