Asian stocks fell, pushing the regional index down for the second day this week, as Japanese shares retreated and Australia’s dollar slipped amid concern over the impact of a weaker Chinese yuan. Gold held near an almost four-month high while oil rose before supplies data.
The MSCI Asia Pacific Index slipped 0.4 percent by 9:57 a.m. in Tokyo, trimming its February advance to 2 percent as Japan’s Topix Index lost 0.7 percent. Standard & Poor’s 500 Index (SPX) futures rose 0.1 percent. The currency of Australia, which counts China as its biggest trading partner, fell 0.3 percent. Gold was steady after four rising days as oil in New York rose 0.2 percent. Natural gas extended losses into a third day.
The yuan’s biggest drop since 2010 stoked speculation China’s central bank is planning to give the managed currency more leeway with lawmakers to start meetings on economic policy and growth targets next week. In the U.S., consumer confidence fell more than analysts estimated and manufacturing in the Richmond area unexpectedly shrank, with mortgages and new home sales data due today. Singapore reports on factory output and Hong Kong is projected to post faster growth for last quarter.
“The weakening currency could be seen as a signal that the recent economic data from China is an indication that the economy is slowing,” Evan Lucas, a markets strategist at IG Ltd. in Melbourne, wrote in an e-mail to clients today. “The downward pressure from the bears may exhaust the bulls’ current enthusiasm, unfortunately.”
Japan’s Nikkei 225 Stock Average lost 0.7 percent, cutting its February advance to 0.3 percent following an 8.5 percent slump in January. Australia’s S&P/ASX 200 Index (AS51) was little changed after snapping a seven-day rally yesterday, while the Kospi Index in Seoul decreased 0.3 percent.
Hang Seng Index futures dropped 0.3 percent in most recent trading. Contracts on the Hang Seng China Enterprises Index of mainland Chinese stocks listed in Hong Kong, which decreased a sixth day yesterday, fell 0.4 percent and the Bloomberg China-US Equity Index of the most-traded Chinese shares in New York slipped 1.5 percent.
The Australian dollar, known as the Aussie, depreciated to 89.85 U.S. cents in a second day of declines. Stop losses were triggered on the currency when it dropped below 90 cents with selling led by hedge funds, an Asia-based trader said, declining to be identified as he isn’t authorized to speak publicly.
The New Zealand dollar, dubbed the kiwi, lost as much as 0.3 percent, snapping a two-day climb. The yen, regarded by some investors as a safe haven, was little changed at 102.19 per dollar after rallying 0.3 percent yesterday.
Twelve-month non-deliverable forwards on the yuan were steady at 6.1537 per dollar in early trading today after slipping 0.2 percent yesterday. Three-month implied volatility on the offshore-traded yuan jumped 11 percent yesterday, data compiled by Bloomberg show.
The People’s Bank of China may double the size of the yuan’s trading band versus the dollar within weeks and is probably allowing recent price swings in preparation for the shift, according to Jens Nordvig, managing director of currency research in New York at Nomura Holdings Inc. The band may be expanded to plus-or-minus 2 percent, twice the current range, Nordvig said.
“This sort of volatility is unheard of for the tightly controlled yuan, and has analysts speculating that the People’s Bank of China is attempting to shake out speculative activity,” Raiko Shareef, a currency strategist at Bank of New Zealand Ltd. in Wellington, wrote in an e-mail to clients today.
The yuan’s 35 percent advance against the greenback since its dollar peg was scrapped in July 2005 is the best performance among 24 emerging-market currencies tracked by Bloomberg. Two-way capital flows will become the “new norm” for China and the exchange rate will probably be more volatile as U.S. monetary stimulus is reined in, China’s State Administration of Foreign Exchange said yesterday in a report.
The PBOC plans to expand the yuan’s trading band in an “orderly” manner this year, it said last week.
Yields on 10-year Treasuries were little changed at 2.70 percent after dropping four basis points in New York as the disappointing data fueled demand for the safety of government debt. Australian government bonds due in a decade followed Treasuries higher, pushing yields down five basis points, or 0.05 percentage point, to 4.12 percent.
The S&P 500 ended the New York session down 0.1 percent, after fluctuating near its record closing level for most of the day. Financial, industrial and technology companies led declines in seven of the 10 main industry groups with the Conference Board’s U.S. consumer confidence index dropping to 78.1 for February, trailing a median economist estimate of 80.
Data on mortgage applications and new home sales in January is scheduled for today, with Federal Reserve Chair Janet Yellen to testify for the U.S. Senate on monetary policy tomorrow. Yellen said this month that only a notable change to the U.S. outlook would prompt policy makers to slow the pace of cuts to its stimulatory bond buying program.
Gold was little changed at $1,339.87 an ounce after rising to the highest price since Oct. 31 yesterday. Palladium added 0.4 percent following yesterday’s 1 percent drop.
West Texas Intermediate crude rose for the second time in five days, gaining to $102.04 a barrel after sliding the most in three weeks yesterday. U.S. crude inventories probably increased for a sixth week to 363.6 million barrels, according to a Bloomberg News survey of analysts before Energy Information Administration data due today.
Natural gas futures extended declines into a third day in early trading, losing 4.3 percent amid speculation warmer weather will cut demand for the heating fuel. Forecasters including MDA Weather Services said frigid weather in the U.S. Midwest and East through next week will ease starting March 7.