Dollar movements, bond yields and oil prices

A forex trader talks on the phone while monitoring exchange rates in a trading room at KEB Hana Bank in Seoul on March 9, 2020.

JUNG YEON-JE | AFP via Getty Images

SINGAPORE – Asia-Pacific markets fell on Friday as investor sentiment turned cautious on new concerns about inflation expectations.

Australian stocks fell after the market opened, with the benchmark ASX 200 falling 0.58%; the index retraced some of its previous losses of more than 1%. Most sectors fell: the energy and materials sectors fell 2.32% and 1.07%, respectively, while the heavily weighted finance sub-index lost around 0.1%.

The Nikkei 225 in Japan fell 0.6% while the Topix index fell 0.32%.

South Korea’s Kospi fell 0.84% ​​and Kosdaq fell 0.62% as tech names were sold. Shares of Samsung Electronics fell 0.84%, SK Hynix fell 2.11% and LG Electronics lost 1.29%.

The Wall Street stock market struggled overnight, where tech stocks took a heavy hit, while the Dow and S&P 500 also fell. That weakness in stocks was reflected in a rebound in bond yields.

Yields move in the opposite direction to prices. Rising bond yields often indicate confidence in the economic recovery and fears about inflation, which can make high-growth stocks appear less attractive to investors.

“It was a mixed session for risk assets overnight as bond yields rose after the FOMC meeting,” ANZ Research analysts wrote in a note on Friday morning. “The Fed will wait for stronger data evidence before raising its federal funds forecasts. This saw market measures of inflation expectations rise, driving bond yields up.”

Coins and oil

In the currency market, the dollar was almost flat at 91.853 against a basket of its peers. Overnight, the dollar erased most of its losses seen following the Fed’s decision on Wednesday.

“The Federal Reserve has no plans to raise interest rates until 2023, but the recovery in the dollar and rising Treasury yields tell us that investors continue to be drawn by the positive outlook for the economy,” said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management said in a note Thursday.

Lien explained that the Fed will not be able to keep the US dollar low “because the launch of vaccines and stimulus controls will contribute to a strong recovery in the second quarter and second half.”

The Japanese yen changed hands at 109.02 per dollar, weakening from a previous level around 108.87. The Bank of Japan will conclude its two-day monetary policy meeting on Friday and reports suggested that the central bank is expected to widen a band in which it allows long-term interest rates to hover around the 0% target.

The Australian dollar fell 0.17% to $ 0.7743.

Oil prices fell on Friday during Asian business hours. US crude was down 0.55% to $ 59.67 a barrel, while the global benchmark Brent index was down 0.51% to $ 62.96.

Overnight prices fell about 7% or more for both US crude and Brent futures.

“Crude oil prices collapsed as concerns about weaker demand in the short term deepened,” the ANZ analysts wrote. “Following recent updates from the IEA, EIA and OPEC, oil demand growth is likely to remain well below previous optimistic forecasts. This comes amid mixed economic data.”

The strength of the US dollar also likely influenced investor appetite in the sector.


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