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Asian stocks edge up as strong dollar weighs on FX

Friday 02:10 GMT

Overview

The US dollar has climbed to a 14-year high in the wake of the Federal Reserve’s decision this week to lift interest rates, putting pressure on Asian currencies and prompting caution among traders of regional stocks.

Hot topic

The dollar has been one of the biggest stories of the December quarter thanks to a more robust outlook for US inflation and growth. That facilitated the Fed’s decision on Wednesday to lift interest rates 25 basis points, and underpins the central bank’s projection of three more of the same in 2017.

Aided by this more hawkish outlook, the US currency has continued to rally. The dollar index was up 0.1 per cent on Friday at 103.14, after jumping on Thursday by the most since June 24 and the aftermath of the Brexit vote to close at its highest level since Christmas day 2002.

Forex

Asian currencies were mostly softer across the board, but by less than Thursday when a stronger dollar resulted in losses of more than 0.4 per cent for major, G10 currencies. The Japanese yen was flat in Asia at ¥118.16 per dollar following Thursday’s 1 per cent drop. The euro was up 0.1 per cent at $1.0421 after closing the previous session at its weakest since early 2003.

The People’s Bank of China on Friday set the midpoint for the renminbi’s daily trading band weaker than Rmb6.95 to the dollar for the first time since May 2008.

Equities

Stocks across the region were cautiously tracking higher. Weakness in the yen continued to underpin gains for Japanese exporters, with the benchmark Topix up 0.6 per cent and the Nikkei 225 up 0.7 per cent.

Shares in Nintendo fell as much as 5.6 per cent as the market delivered a lukewarm response to the debut of the Super Mario Run mobile game in Apple’s app store — the first appearance of the popular Italian plumber on a smartphone.

Australia’s S&P/ASX 200 and Hong Kong’s Hang Seng each added 0.2 per cent, while China’s Shanghai Composite edged up 0.1 per cent.

Commodities

Gold was eyeing its first gain since Monday, up 0.2 per cent in Asia trading at $1,130.24 an ounce. The yellow metal, down 2.6 per cent for the week, was on track for its worst weekly performance since mid-November.

Brent crude, the international benchmark, was up 0.4 per cent at $54.26 a barrel while West Texas Intermediate gained 0.5 per cent to $51.15.

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