Asian stocks trended lower Thursday after the U.S. dollar slid overnight, pressuring export-reliant Japanese stocks.
The ICE U.S. dollar index fell to levels last seen in 2014, after U.S. Treasury Secretary Steven Mnuchin said at the World Economic Forum in Davos, Switzerland, that “a weaker dollar is good for trade.”
The drop pushed the currency-sensitive Nikkei Stock Average NIK, -1.13% 0.9% lower at the end of morning trading. Japanese exporters extended Wednesday’s declines on a stronger yen, with Sony 6758, -3.55% falling an additional 2%.
The dollar JPYUSD, +0.145791% was recently at ¥109.20, versus ¥110 on Wednesday.
The sliding dollar had wide impact across markets. The offshore Chinese yuan strengthened by the most against the U.S. dollar since September recently traded at 6.3415.
Most global investors are overweight the dollar and underweight other currencies in economies where growth is faster, said Ben Sy, head of fixed income, currencies and commodities at JP Morgan Private Bank in Hong Kong. That positioning, he added, should put further pressure on the greenback.
“People have got to reduce their dollar positions or reduce underweight positions in emerging-market currencies.”
Oil futures extended overnight gains, hitting fresh three-year highs.
Brent LCOH8, +0.38% was up 0.6% at $70.93 a barrel, which provided support for energy stocks in Australia. Woodside Petroleum WPL, +0.41% , the country’s biggest listed energy firm, rose 0.4% even as the S&P/ASX 200 XJO, -0.08% eased 0.1% on fresh weakness in banking and utility stocks.
Big Australian miners BHP Billiton BHP, +0.55% and Rio Tinto RIO, +0.78% rose more than 1% each as metal prices strengthened. U.S. gold futures finished at 17-month highs on Wednesday and silver’s 3.4% increase was the most since September 2016.
Chinese stocks listed in Hong Kong dropped, putting the Hang Seng China Enterprises Index on track to snap a winning streak that has lasted 19 days, the longest in the gauge’s history. The wider Hang Seng Index HSI, -0.92% was down 0.5%, with the Shanghai Composite SHCOMP, -0.31% posting a similar decline.
But South Korea’s Kospi SEU, +0.95% climbed 0.8% to the brink of November’s intraday record high, even as fourth-quarter gross domestic product unexpectedly fell 0.2% from the third quarter. Index heavyweight Samsung 005930, +1.86% led gains, rising 1.2%.
Taiwan’s Taiex Y9999, +0.12% rebounded 0.5% after sliding Wednesday.
New Zealand’s NZX 50 NZ50GR, +0.55% rose 0.2%, after consumer prices rose less than expected in the fourth quarter of last year. The latest data suggest that the Reserve Bank of New Zealand can wait a while before raising rates, market participants said.
However, interest rates are likely to rise in Malaysia, with the majority of analysts expecting Bank Negara Malaysia to announce a 0.25 percentage point increase Thursday.
The European Central Bank is scheduled to hold its first policy meeting of the year later in the day. Analysts don’t expect the ECB to raise rates, but market participants will scrutinize ECB President Mario Draghi’s speech for fresh signs of hawkishness.
Société Générale says the gathering “looks set to be more exciting than expected,” as December’s meeting “revealed a very-positive economic outlook.”