Asian shares run out of steam after rally
Tokyo, September 20, 2013
Asian shares ran out of steam on Friday as investors pondered what policy the US Federal Reserve will pursue after it triggered a global market rally by leaving its stimulus level unchanged.
The dollar drifted off a seven-month low against a basket of major currencies and US Treasury yields rose after a string of upbeat US data provided a reminder to markets that the day the Fed starts to cut its bond-buying is not far off.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat, though trading was slowed by holiday in China and South Korea. On the week, however, the index was up 3.3 percent, which would be its biggest gain in more than a year, if sustained.
Japan's Nikkei average initially eked out a gain to hit an eight-week high, but then slipped and was 0.2 percent down for the day.
"This has been a very positive week for Japan and risk assets in general. First, we had (Lawrence) Summers' exit the race to head the Fed, and the surprise Fed decision not to taper gave another boost for risk appetite," wrote Stefan Worrall, director of equity cash sales at Credit Suisse.
The Fed's shock decision on Wednesday sparked a broad-based rally in global stocks, commodities and riskier currencies as sentiment was buoyed by the prospect of cheap dollars sloshing around in financial markets for some more time.
That gave a much-needed fill-up to emerging markets, which had suffering for months from concern that an end of cheap dollars could cause capital outflow.
"In a way, the decision was good for the global economy in the short term. But it's a bit like you were supposed to have an injection but you decided not to, because it looked painful. Whether it was a right call remains to be seen," said Arihiro Nagata, head of foreign bond trading at Sumitomo Mitsui Banking Corp.
Fed tapering expectations were kept alive by data on Thursday showing US home resales surged in August to a 6-1/2-year high and factories grew busier in the Mid-Atlantic region this month.
That helped push the US 10-year notes yield back up to 2.75 percent from a five-week low of 2.67 percent touched just after the Fed's decision.
Many market players still expect the Fed to start reducing its stimulus later this year.
The dollar index, which measures it against a basket of six major currencies, stood little changed at 80.35 , off seven-month lows of 80.06 hit on Wednesday.
The euro held not far from a 7 1/2-month high of $1.3568 hit on Thursday, last trading at $1.3535.
The common currency has been supported by signs of recovery in the euro zone economy, but some investors are getting nervous ahead of Germany's election on Sunday.
The Indonesian rupiah gave up some of Thursday's gains to trade at 11,340 per the dollar, down 0.6 percent on the day. Jakarta shares, which jumped 4.7 percent on Thursday, lost more than 1 percent.
The Indian rupee weakened 0.6 pct to 62.15 to the dollar ahead of a policy announcement from the Reserve Bank of India at 0530 GMT, the first one under its new chief Raghuram Rajan. - Reuters