Asian shares steady, dollar slumps on ECB’s tapering signal
TOKYO (Reuters) – Asian shares edged up on Friday as investors kept a wary eye on another US storm, while the dollar skidded after European Central Bank chief Mario Draghi suggested the bank may begin tapering its massive stimulus programme this autumn.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1 percent, but was still down 0.2 percent for the week. Japan’s Nikkei stock index was pressured by a stronger yen and slipped 0.5 percent, losing 2 percent for the week.
Wall Street ended little changed on Thursday, as investors continued to tracking Hurricane Irma, which was bearing down on Florida on the heels of devastation in Texas caused by Hurricane Harvey.
Economists said Harvey could weigh on US economic growth for the third quarter, though they did not this to delay the US Federal Reserve’s announcement of a plan at its meeting this month to start trimming its $4.2 trillion debt portfolio.
The storm caused US initial jobless claims to spike to a two-year high, despite an underlying strength in the labour market.
“Economic conditions appear to warrant the continued removal of accommodation, and we think that will occur in two primary fashions, the first of which will be normalization of the balance sheet,” said Bill Northey, chief investment officer at US Bank Private Client Group based in Helena, Montana.
“But inflation has been stubbornly low and we’re not seeing a lot of material data to indicate that is changing,” he added.
New York Fed President William Dudley said on Thursday that the central bank should continue gradually raising US interest rates given low inflation should rebound, sounding slightly less confident than his previous hawkish comments in the face of weak price readings.
The benchmark US Treasury yield stood at 2.045 percent in Asian trade, down from its US close of 2.061 percent. It plumbed a 10-month low of 2.03 percent on Thursday.
Besides the slumping Treasury yields, the dollar was also pressured by ECB head Draghi’s remarks that policymakers would decide on tapering this autumn, and that “probably the bulk of these decisions will be taken in October.”
The ECB must take into account the weakening of inflation owing to the strong euro as it prepares to wind down its stimulus, Draghi said, after the central bank kept rates at record lows at its regular policy meeting and confirmed that asset purchases would continue at least until December.
The euro was up 0.1 percent at $1.2028 after surging as high as $1.2059 on Thursday, not far from its 2-1/2-year high of $1.2070 hit late last month.
The dollar inched 0.1 percent lower against then yen to 108.32 yen, moving back toward a 10-month low of 108.05 touched on Thursday.
The dollar index, which tracks the greenback against a basket of six major currencies, was down 0.2 percent at 91.467, moving back toward Thursday’s low of 91.405, its weakest since January 2015.
Crude oil futures firmed, with Brent crude gaining 7 cents, or 0.1 percent, to $54.56 a barrel, while US crude edged up 2 cents to $49.11 per barrel.
On Thursday, global crude oil benchmarks diverged, with Brent rising to a 5-1/2 month high. But US crude slipped on a bigger-than expected crude stock build, as the restart of US refiners after Hurricane Harvey was countered by the threat of Hurricane Irma.