Asian stocks rise, markets on yuan watch
Wednesday, 7 April 2010
SINGAPORE, Apr 6 (Reuters): Asian stock markets rose to three-month highs Tuesday, extending a two-week rally fuelled by strong US economic data and a seeming thaw in US-China tensions over the yuan.
The dollar held near 7-month highs against the yen, supported by a surge in US Treasury yields, while the Australian dollar gained after the central bank raised interest rates by a quarter point, stoking expectations it will do the same next month.
European stocks were also set to rise as much as 0.8 per cent after a long Eastern holiday weekend, following Asian and US markets.
The MSCI Asia ex-Japan index rose half a per cent on signs that a global recovery was gathering strength, with data Monday showing the US services sector expanded at its fastest pace in four years in March
The services report and stronger-than-expected pending home sales pushed the Dow Jones Industrial average up 0.4 per cent, just shy of the psychologically important 11,000 point mark.
Taiwan's stock market initially rose 1 per cent and then paring gains, while Jakarta's hit a fresh record high before also falling back.
But some of Asia's stock markets struggled to maintain momentum after having hit successive highs in the past week.
Still, the sluggishness in South Korean stocks even after Samsung rose to a fresh high suggested investors may have already priced in upbeat earnings estimates, which could limit further gains in coming months.
The tech-heavy KOSPI has risen 10 per cent in the past two months. Samsung surged nearly 20 percent in recent weeks but closed down 0.1 per cent Tuesday.
At the same time, besides a gradual easing of concerns about European sovereign debt over the past few weeks, investors' appetite for riskier assets was boosted at the weekend by an announcement that the US Treasury had delayed by at least three months its semi-annual report on currency policy.
That report, due on April 15, could have named China a currency manipulator, sparking trade frictions and more defiance from the Chinese authorities on the virtually pegged yuan
The yuan firmed further in offshore forward markets Tuesday, taking the implied appreciation in a year's time to just above 3 per cent, as markets in Shanghai opened after a long weekend and roused speculation of a currency revaluation, albeit a small one.
"China is more or less getting ready for a move in the currency. We think that move will happen in the next 4 to 5 weeks," said Mirza Baig, currency strategist with Deutsche Bank.
"The kind of move might not be what the market expects. We think China might be moving towards allowing two-way fluctuations in the dollar/china exchange, instead of a purely one-way appreciation."
The dollar gained 0.35 per cent against a basket of major currencies Tuesday. It fell against the yen to near 94 while the euro slipped to $1.3420.
The Aussie dollar rallied around 45 pips to $0.9220 after the Reserve Bank of Australia delivered its fifth rate rise since October, particularly against the New Zealand dollar and euro.
Asian currencies rose Monday and continued their gains Tuesday, expecting that China will unleash the yuan from its peg within the three-month window given by the US authorities.
Malaysia's ringgit regarded as one of the best proxies for betting on the yuan, rose 0.4 per cent to 3.2170 per dollar.
Analysts expect currencies and stocks in resource-rich Asian economies will benefit if and when a higher yuan makes it cheaper for China to import more.
Non-deliverable dollar/yuan forwards have fallen across the curve this week, with the one-year NDF hitting levels close to 6.62 yuan per dollar, its lowest since January.
Deutsche's Baig said he liked to be long Asian currencies generally because growth in the region was more robust than in the West.
The dollar held near 7-month highs against the yen, supported by a surge in US Treasury yields, while the Australian dollar gained after the central bank raised interest rates by a quarter point, stoking expectations it will do the same next month.
European stocks were also set to rise as much as 0.8 per cent after a long Eastern holiday weekend, following Asian and US markets.
The MSCI Asia ex-Japan index rose half a per cent on signs that a global recovery was gathering strength, with data Monday showing the US services sector expanded at its fastest pace in four years in March
The services report and stronger-than-expected pending home sales pushed the Dow Jones Industrial average up 0.4 per cent, just shy of the psychologically important 11,000 point mark.
Taiwan's stock market initially rose 1 per cent and then paring gains, while Jakarta's hit a fresh record high before also falling back.
But some of Asia's stock markets struggled to maintain momentum after having hit successive highs in the past week.
Still, the sluggishness in South Korean stocks even after Samsung rose to a fresh high suggested investors may have already priced in upbeat earnings estimates, which could limit further gains in coming months.
The tech-heavy KOSPI has risen 10 per cent in the past two months. Samsung surged nearly 20 percent in recent weeks but closed down 0.1 per cent Tuesday.
At the same time, besides a gradual easing of concerns about European sovereign debt over the past few weeks, investors' appetite for riskier assets was boosted at the weekend by an announcement that the US Treasury had delayed by at least three months its semi-annual report on currency policy.
That report, due on April 15, could have named China a currency manipulator, sparking trade frictions and more defiance from the Chinese authorities on the virtually pegged yuan
The yuan firmed further in offshore forward markets Tuesday, taking the implied appreciation in a year's time to just above 3 per cent, as markets in Shanghai opened after a long weekend and roused speculation of a currency revaluation, albeit a small one.
"China is more or less getting ready for a move in the currency. We think that move will happen in the next 4 to 5 weeks," said Mirza Baig, currency strategist with Deutsche Bank.
"The kind of move might not be what the market expects. We think China might be moving towards allowing two-way fluctuations in the dollar/china exchange, instead of a purely one-way appreciation."
The dollar gained 0.35 per cent against a basket of major currencies Tuesday. It fell against the yen to near 94 while the euro slipped to $1.3420.
The Aussie dollar rallied around 45 pips to $0.9220 after the Reserve Bank of Australia delivered its fifth rate rise since October, particularly against the New Zealand dollar and euro.
Asian currencies rose Monday and continued their gains Tuesday, expecting that China will unleash the yuan from its peg within the three-month window given by the US authorities.
Malaysia's ringgit regarded as one of the best proxies for betting on the yuan, rose 0.4 per cent to 3.2170 per dollar.
Analysts expect currencies and stocks in resource-rich Asian economies will benefit if and when a higher yuan makes it cheaper for China to import more.
Non-deliverable dollar/yuan forwards have fallen across the curve this week, with the one-year NDF hitting levels close to 6.62 yuan per dollar, its lowest since January.
Deutsche's Baig said he liked to be long Asian currencies generally because growth in the region was more robust than in the West.