Wednesday 05:05 BST. Asian markets pared early gains as a strengthening yen chipped away at Japanese exporters and the price of oil retreated.
Regional stocks spent much of the morning in positive territory after Wall Street posted its biggest one-day rise in two months.
Japan’s broad Topix was flat and the Nikkei 225 was up 0.2 per cent, having been as much as 1.5 per cent higher shortly after the open. Those gains were whittled away as the yen reversed course and strengthened 0.5 per cent to ¥108.78 per US dollar, recouping a quarter of its declines over the previous two sessions.
Australia’s S&P/ASX 200 rose 0.6 per cent, while Hong Kong’s Hang Seng fell 0.6 per cent. On the Chinese mainland, the Shanghai Composite and technology-focused Shenzhen Composite were each up 0.6 per cent.
Oil prices also turned south, with Brent crude, the international benchmark, down 0.4 per cent at $45.34 a barrel and West Texas Intermediate, the US marker, down half of a percentage point at $44.43.
Brent rallied 4.3 per cent during Tuesday’s session — its biggest one-day gain since April 12 — over supply concerns in Nigeria, where vandalism of oil infrastructure has cut output to its lowest in more than two decades. Also of concern are disruptions caused by wildfires in Canada’s oil sands region.
That supported energy stocks on Wall Street, while financials on both sides of the Atlantic were boosted by solid quarterly results from Credit Suisse. The S&P 500 rose 1.3 per cent for its biggest one-day gain since March 11, and the Nasdaq Composite added 1.3 per cent.
The stronger yen weighed on the US currency. The dollar index, a measure of the greenback against a basket of global peers, was 0.2 per cent weaker at 94.148, potentially spelling the end of a six-day win streak.
Notwithstanding Wednesday’s decline, analysts at DBS were among those pointing to a rebound in manufacturing momentum and “core” inflation pressures in the US as reasons why the dollar could climb.
“We may be on the cusp of a US dollar rally against a range of currencies. The poor dollar performance since late last year, however, may be seen in the context of what has essentially been a sideways channel from March 2015. We are now at the bottom of that channel with more upside than downside risks,” DBS said.
The recent strength in the dollar has generally weighed down commodities prices, with the assets typically moving in opposite directions. Gold was 0.4 per cent higher at $1,270.50 an ounce.
Iron ore futures on China’s Dalian Commodity Exchange swung out of negative territory, up 0.4 per cent, and were on track to post their first gain in seven sessions.
The New Zealand dollar was the best-performing Asian currency, up 0.6 per cent after the release of the Reserve Bank’s financial stability report.
Graeme Wheeler, the central bank governor, told a parliamentary committee that the RBNZ was “seriously looking” at introducing further measures to address risks around the sanguine dairy sector and frothy housing market, which may include debt-to-income ratio restrictions.
“If taken, this would be a significant step. The RBNZ are already restricting loan-to-value ratios, so a debt-to-income ratio restriction implicitly caps house prices, relative to incomes. Given that nominal income growth is relatively low, these measures would reduce house price inflation substantially,” said Ben Jarman, JPMorgan economist.
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