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Asia: Stocks fall, Yen gains before BOJ meeting; Aussie weakens

Tuesday, March 15, 2016 - 11:46

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[WELLINGTON] Asian stocks retreated from a 10-week high and the yen strengthened before the Bank of Japan concludes a monetary policy review on Tuesday.

The MSCI Asia Pacific Index declined for the first time in four days.

The yen strengthened against all 31 major peers as economists forecast the BOJ will maintain stimulus after unexpectedly moving into negative interest-rates territory in January.

The yuan depreciated as China's central bank cut its daily fixing by the most in two months. Malaysia's ringgit and Australia's dollar led losses among the currencies of resource- exporting nations as oil dropped toward US$37 a barrel. Gold fell to its lowest level in almost two weeks.

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The BOJ's review, to be followed by a policy decision from the Federal Reserve on Wednesday, comes after the European Central Bank announced unprecedented stimulus last week to help revive economic growth and prevent deflation.

While world equities have staged a comeback since reaching a 2 1/2-year low in mid-February, gains have been tentative and negative 10-year bond yields in Japan and Switzerland are a sign that investor sentiment remains fragile.

"Investors are trying to see where US and Japanese monetary policy will be going," said Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co in Tokyo. "Most think that the Bank of Japan won't make a move, but they might. The Japanese economy is worsening, so the possibility that they'll do something isn't zero."

STOCKS

The MSCI Asia-Pacific gauge lost 0.6 per cent as of 11.20am. Tokyo time, led by declines in raw-materials producers. Australia's S&P/ASX 200 Index slid 1.2 per cent, while benchmarks also declined in China, Hong Kong and Japan.

Standard & Poor's 500 Index futures were little changed early Tuesday, following a 0.1 per cent retreat in the US benchmark last session.

CURRENCIES

The yen strengthened 0.1 per cent to 113.73 versus the dollar. While only five of 40 economists surveyed expect further easing at Tuesday's BOJ meeting, lingering in the back of traders' minds will be their surprise move in January. Eighty-eight per cent of economists in the poll forecast more action by the end of July.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed Tuesday after rising 0.4 per cent last session. While traders are pricing in little chance of a Fed rate increase on Wednesday, they have boosted bets on a move happening later in the year.

Fed funds futures show the probability of a June increase is now about 50 per cent, having risen from less than 10 per cent a month ago as economic data improved, oil prices stabilised and equities rallied.

Monday's oil drop weighed on the ringgit, which declined 0.4 per cent versus the dollar. The Australian and Canadian dollars slid 0.3 per cent. The yuan weakened 0.1 per cent after the People's Bank of China lowered its reference rate for the currency by 0.26 per cent.

COMMODITIES

West Texas Intermediate crude fell 0.3 per cent to US$37.06 a barrel, extending Monday's 3.4 per cent slide. US stockpiles probably expanded last week, keeping supplies at the most since 1930, analysts predicted ahead of data due on Wednesday.

Gold for immediate delivery dropped 0.7 per cent to US$1,227.06 an ounce, after sliding more than 1 per cent on each of the last two trading days. The precious metal, regarded as a hedge against inflation and a haven asset, is still up 16 per cent this year.

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