Euro builds on gains against dollar, Asia markets mostly down

AFP, HONG KONG: The euro extended its gains in Asian trade yesterday as traders bet on the European Central Bank winding in its huge stimulus programme, while equity markets ended a volatile week mostly in the red. ECB boss Mario Draghi sent the euro surging past $1.20 for the first time since the beginning of January 2015 by saying policymakers would decide next month on the bank’s plans for its bond-buying scheme.

While he did not openly say the bank would begin to cut back on the programme, his comments—and his lack of concern about the strong euro—were taken as a nod that the tapering would begin soon.

The remarks came as figures showed the eurozone economy continued to improve in the second quarter.

“Growth at these levels does not warrant the continuation of the ECB’s bond-buying programme. So it must end. The ECB knows it and the market knows it.

That’s what is driving the euro higher and it’s what is complicating the decision for the ECB on the when and how,” said Greg McKenna, chief market strategist at AxiTrader.

The dollar was also coming under pressure from concerns about the impact of Hurricane Irma, which is about to strike Florida this weekend, while the chances of President Donald Trump pushing through his market-friendly economic agenda are slimming.

“Investors have renewed their interest on the US political overhang as the political landscape continues to weigh heavily on the dollar. Specifically, the long and winding and no less bumpy road to tax reform looks more of a pipe dream now than ever,” said Stephen Innes, head of Asia-Pacific trading at OANDA.

Yuan strength

The greenback fell below 108 yen to its lowest levels since November.

It was also down at 16-month lows of 6.5032 Chinese yuan, having flirted with 7.0 yuan earlier this month as the expectations of US rate hikes and vast capital outflows reversed and China’s economy showed signs of picking up.

“The appreciation of the RMB against the USD this year has been driven by a combination of USD weakness, China’s tighter management of capital outflows, reduced risk of large scale US-China trade war, and improved economic performance and market sentiment on China,” UBS China economist Wang Tao said in a note.

North Korea tensions, which fuelled a global sell-off after Pyongyang tested what it said was a hydrogen bomb on Sunday, were eased a little by Trump’s remarks that a US military strike was “not inevitable”.

However, with world powers struggling to agree on a way to address the crisis, markets remain on edge, with many observers fearing the North will conduct another missile test on Saturday.

On equity markets, Tokyo ended 0.6 per cent lower with exporters hit by the stronger yen while figures showed the Japanese economy continued to expand in the second quarter but at a slower pace than first thought.

Sydney was down 0.3 per cent and Singapore shed 0.2 percent. Hong Kong edged up 0.5 per cent while Wellington and Taipei were also higher.

Shanghai was barely moved following data showing Chinese exports grew slower than expected in August owing to weak foreign demand, though imports beat forecasts raising hopes for the domestic outlook.

In early European trade London fell 0.2 per cent, while Paris and Frankfurt each shed 0.3 per cent.

 

 

Euro builds on gains against dollar, Asia markets mostly down

AFP, HONG KONG: The euro extended its gains in Asian trade yesterday as traders bet on the European Central Bank winding in its huge stimulus programme, while equity markets ended a volatile week mostly in the red. ECB boss Mario Draghi sent the euro surging past $1.20 for the first time since the beginning of January 2015 by saying policymakers would decide next month on the banks plans for its bond-buying scheme. While he did not openly say the bank would begin to cut back on the programme, his commentsand his lack of concern about the strong eurowere taken as a nod that the tapering would begin soon. The remarks came as figures showed the eurozone economy continued to improve in the second quarter. Growth at these levels does not warrant the continuation of the ECBs bond-buying programme. So it must end. The ECB knows it and the market knows it. Thats what is driving the euro higher and its what is complicating the decision for the ECB on the when and how, said Greg McKenna, chief market strategist at AxiTrader. The dollar was also coming under pressure from concerns about the impact of Hurricane Irma, which is about to strike Florida this weekend, while the chances of President Donald Trump pushing through his market-friendly economic agenda are slimming. Investors have renewed their interest on the US political overhang as the political landscape continues to weigh heavily on the dollar. Specifically, the long and winding and no less bumpy road to tax reform looks more of a pipe dream now than ever, said Stephen Innes, head of Asia-Pacific trading at OANDA. Yuan strength The greenback fell below 108 yen to its lowest levels since November. It was also down at 16-month lows of 6.5032 Chinese yuan, having flirted with 7.0 yuan earlier this month as the expectations of US rate hikes and vast capital outflows reversed and Chinas economy showed signs of picking up. The appreciation of the RMB against the USD this year has been driven by a combination of USD weakness, Chinas tighter management of capital outflows, reduced risk of large scale US-China trade war, and improved economic performance and market sentiment on China, UBS China economist Wang Tao said in a note. North Korea tensions, which fuelled a global sell-off after Pyongyang tested what it said was a hydrogen bomb on Sunday, were eased a little by Trumps remarks that a US military strike was not inevitable. However, with world powers struggling to agree on a way to address the crisis, markets remain on edge, with many observers fearing the North will conduct another missile test on Saturday. On equity markets, Tokyo ended 0.6 per cent lower with exporters hit by the stronger yen while figures showed the Japanese economy continued to expand in the second quarter but at a slower pace than first thought. Sydney was down 0.3 per cent and Singapore shed 0.2 percent. Hong Kong edged up 0.5 per cent while Wellington and Taipei were also higher. Shanghai was barely moved following data showing Chinese exports grew slower than expected in August owing to weak foreign demand, though imports beat forecasts raising hopes for the domestic outlook. In early European trade London fell 0.2 per cent, while Paris and Frankfurt each shed 0.3 per cent.