Asian equities rise, dollar gains ground

Asia equities drift higher

Wall Street finished on a higher note overnight, the Dow Jones and S&P 500 at record highs. A quiet day on the US bond market was enough to tempt the herd back into action, with the S&P 500 rising 0.65%, the Nasdaq jumping 1.05%, and the Dow Jones climbing 0.53%. US futures on the Nasdaq have advanced 0.30% in Asia, with the other indexes unchanged.

The overnight price action has greenlighted a positive day in Asia, albeit a relatively calm one, with Asian markets content to wallow in wait-and-see-mode. The Nikkei 225 and Kospi are 0.55% higher, with the Shanghai Composite and CSI 300 rising 0.30%.

Hong Kong has risen 0.65%, while Singapore, Kuala Lumpur, and Jakarta see profit-taking, leaving them unchanged after previous solid sessions. The ever-optimistic Australian markets are the region’s outperformers; both the ASX 200 and All Ordinaries are 1.0% higher after the RBA minutes were suitably dovish.

Asia’s positive session will set European markets up for a positive start. However, the suspension of the AstraZeneca vaccinations across the bloc and a resurgence of new infections in parts will temper the gains. Overall, equity markets seem content to follow Wall Street’s lead cautiously ahead of the FOMC meeting outcome.

The US dollar strengthened overnight, despite a slight easing in US yields and a strong US stock market. The dollar index finished the day 0.16% higher at 91.69 and remains unchanged in Asia. EUR/USD eased to 1.1935 overnight on Covid-19 issues and looked set to retest 1.1900 as the G-7’s weakest performer overnight.

The US dollar strength in the face of previously mechanical correlations to US yields is interesting. It may suggest that currency markets more deeply feel worries about the FOMC now. That makes sense, given the world spent all of 2020 selling the greenback and is still structurally short. Given that the US dollar did not fall with yields overnight, it is not unreasonable to think that it will therefore rise if the US yields spike, the upside being the weakest side right now.

Asian markets are in suspended animation today, with both regional and major currencies almost unchanged from their overnight closes. A lack of new directional pushes leaves Asia content to watch developments in other time zones.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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