Dollar stands tall after firm U.S. data, Asian stocks wobble

Hong Kong, Nov 17 (BUS): The dollar hit a four-and-a-half year high against the yen on Wednesday after better-than-expected US retail data also boosted Wall Street shares, despite the failure of Asian shares. to follow suit.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.45%, retreating from Tuesday’s three-week closing high, with declines in most markets, while Japan’s Nikkei lost 0.4%.

The dollar reached a high of 114.97 yen in the early Asian hours, its strongest since March 2017, while the euro slipped to a 16-month low of $1.1320.

The dollar was helped by Tuesday’s data that showed US retail sales rose faster than expected in October, which could encourage the US Federal Reserve to speed up curtailment of its asset purchase program, as inflation remains high.

“The data supports this feeling that things are going well, and the Fed could be more aggressive if it wanted to be without completely causing the party to collapse,” said Rob Carnell, head of research for Asia Pacific at ING.

He added: “The most important thing on everyone’s mind is inflation right now, and it’s still a problem after the numbers we got out of the US yesterday, and we have a whole barrage of other inflation data coming in today, particularly the UK and Canada.”

Britain is to release its October CPI inflation data later today, and the higher reading is likely to increase pressure on the Bank of England to raise interest rates in December after it surprised markets by halting them last month.

“What it’s not about the Biden Xi summit, which would have likely done damage but apparently didn’t,” Carnell added.

In a three-hour meeting on Tuesday, US President Joe Biden and Chinese leader Xi Jinping dismissed some of the Sino-US tensions, though both sides stuck to their firm positions on a range of issues.

The positive tone provided a slight boost to Asian stocks on Tuesday, but this proved short-lived.

On Wednesday, the benchmark Hong Kong index fell 0.4%, dragged down by real estate developers and casinos as traders bet that the recent recovery in both sectors has gone too far. Chinese potato chips were flat.

Australian shares fell 0.5%, dragged down by the Commonwealth Bank of Australia, the country’s largest bank, whose shares fell 6% after being affected by profit margins from the low interest rate environment and mortgage competition.

Overnight on Wall Street, the Dow Jones Industrial Average rose 0.15%, the S&P 500 rose 0.39% and the Nasdaq Composite rose 0.76%, boosted by retail sales figures.

These also provided a boost to US Treasuries and benchmark 10-year bond yields, which reached 1.466% in early Asia, a three-week high.

US crude fell 0.66% to $80.25 a barrel. Brent crude fell 0.5% to $82.03 a barrel.

Spot gold was up 0.25% at $1,854 an ounce, climbing back towards a five-month high of $1,876.9 hit the day before on rising inflation fears.

A rival inflation hedge, Bitcoin, settled at $60,240 after dropping 5% the day before and briefly dropping below $60,000.

HF