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[TOKYO] Asian shares stepped back on Friday and major currencies mostly stuck to late US levels as investors caught their breath, after Switzerland's unexpected move to abandon its currency cap jolted markets already roiled by plunging commodities prices.
The euro suffered its biggest one-day drop against the Swiss franc in history and skidded to an 11-year low against the US dollar after the Swiss National Bank (SNB) suddenly ditched its commitment to keep its franc above 1.20 per euro.
Investors took this as a sign that the European Central Bank would launch large-scale bond buying next week, as many had already expected. "Volatility has been on the rise since the beginning of the year and the SNB's announcement adds to the growing list of developments that could trigger greater volatility in the financial markets," Kathy Lien, managing director at BK Asset Management in New York, said in a note, citing the ECB's Jan 22 rate decision as well as Greek elections in the first quarter of the year.
MSCI's broadest index of Asia-Pacific shares outside Japan edged down about 0.1 per cent in early trade. But Japan's Nikkei stock average slumped 2 per cent as a resurgent yen touched a fresh one-month low on its safe-haven appeal.
On Wall Street overnight, stocks closed lower, marking a fifth straight session of losses as investors digested the SNB's move, disappointing bank results and the potential impact of global economic weakness on US corporate earnings.
The Swiss currency surged as much as 30 per cent to a high of 0.8500 franc per euro after the SNB's announcement. The European unit was last up 0.3 per cent on the day at 0.9945 francs.
Against the dollar, the euro was flat on the day at US$1.1635 after falling as low as US$1.15675 on Thursday, a nadir not seen since November 2003.
The greenback touched a fresh one-month low of 115.90 yen in early Asian trade, and was last steady on the day at 116.14 yen.
Further undermining the dollar's attractiveness, US Treasury yields fell as investors sought the safety of fixed-income assets, with the 30-year yield touching fresh all-time lows and the benchmark 10-year yield wallowing at nearly two-year lows. The 10-year yield edged down to 1.722 per cent in Asia, from its U.S. close of 1.775 per cent on Thursday.
Spot gold was up about 2 per cent at US$1,263.11 an ounce after spiking as much as 3 per cent to a four-month high after the Swiss move.