Dollar trades near one-week low
Asian government bond prices have firmed in line with US Treasuries, and the dollar is on the defensive after comments by Fed chief Alan Greenspan on the state of the US economy.
Share markets were flat on Thursday after a tepid performance in US markets. The Nikkei stock average fell 0.08% in morning trade, with recent gainers including Canon Inc under pressure ahead of keenly awaited economic data.
By 02:30 GMT MSCI’s index of non-Japan Asian share markets was unchanged and most regional markets were steady. US crude oil futures slipped ahead of key supply data.
In testimony before the US Congress, Greenspan said inflation and expectations of inflation have eased in recent months, leading some traders to conclude the Fed may slow its pace of interest rate tightening after its 21 September meeting.
‘Weaker tone’
“I think his tone was somewhat weaker than expected,” said
Toshihiro Azuma, forex manager at Sumitomo Trust and Banking.
The dollar was around 109.25 yen versus 109.35 in late US
trade and just above Wednesday’s low of 109.04 yen. The euro was at $1.2185 flat from late US levels but up about a cent from 24 hours earlier.
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Weak US economic data has been |
The $1.2250 level is a major target where a lot of option-related stop-loss orders are seen lined up, dealers said.
The market sees the Federal fund rate at 2.0% at the end of this year, compared with the current 1.50%, indicating no rate hike at one of the three Fed meetings left before the year ends.
The yield on the benchmark 263rd 10-year cash bond was down 5.5 basis points at 1.565%. The key September JGB futures contract leapt 0.54 points to 137.62.
The futures contract was also supported ahead of its benchmark rollover later in the day. Traders were awaiting Japanese machinery orders for July, due at 05:00 GMT.
The Bank of Japan ends its two-day board meeting later on
Thursday, but no change in policy is expected.
South Korean government bond prices were also bolstered by
Greenspan’s cautious comments ahead of a Bank of Korea policy meeting.
The yield on three-year Treasury bonds had fallen six basis
points to 3.57% by the time the central bank announced its decision to leave rates unchanged at a record low.
Awaiting Data
Optimism towards the Japanese economy has supported the
Tokyo stock market since a strong capital spending survey for
the June quarter earlier this week spurred expectations for an
increase in revised gross domestic product data for the
quarter, due on Friday.
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Optimism about Japan’s economy |
Machinery orders data, a highly volatile figure regarded as a leading indicator of capital spending, was being awaited to help gauge the strength of the economy.
UFJ Holdings Inc dropped 2.3% to 509,000 yen after news that the bank, the weakest of Japan’s top four lenders, was set for a half-year loss of over $6 billion as it hacked away at its bad loans before a planned takeover by bigger rival Mitsubishi Tokyo Financial Group.
The stock market shrugged off data released that showed smaller-than-expected growth of 8.2% year-on-year in Japan’s current account surplus for July. Economists said the pace of increase was slowing, in part due to high oil costs.