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[TOKYO] Asian shares slumped on Friday, on track for a weekly loss as plunging crude prices heightened fears about receding global growth, while China's yuan hit its weakest level in more than four years.
A supply glut in oil markets and cooling growth in China, the world's biggest commodities consumer, have pressured many asset markets ahead of a widely expected hike to US interest rates by the Federal Reserve next week.
China's central bank set its guidance rate at the weakest level in more than four years on Friday, a sign Beijing is permitting the currency to depreciate after it was included in the International Monetary Fund's reserve basket.
The lower fixings have also raised questions about how far the central bank intends to let it depreciate.
In the spot market, the yuan was changing hands at 6.4515 in early trade, taking out its August low hit after the unexpected devaluation of the Chinese currency. It also marked the lowest level since the middle of 2011.
MSCI's broadest index of Asia-Pacific shares outside Japan erased early gains and was down about 0.4 per cent, facing a weekly loss of 2.7 per cent.
Chinese shares were lower ahead of a spate of economic data scheduled to be released on Saturday.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen was down 0.8 per cent, while the Shanghai Composite Index shed 0.9 per cent.
Japan's Nikkei stock index bucked the trend, buoyed by overnight gains on Wall Street and a weaker yen, adding 0.9 per cent. But it was still headed for loss of 1.4 per cent for the week.
The dollar index, which tracks the US unit against a basket of six major rivals, was up about 0.1 per cent at 98.044. But it was on track for a weekly loss of about 0.3 per cent after investors trimmed dollar-long positions ahead of next week's US Federal Reserve meeting at which the central bank is widely expected to hike interest rates for the first time in nearly a decade.
Fed fund futures place an 85 per cent chance of the Fed raising rates at its Dec 15-16 meeting. A recent Reuters poll also showed that all but one of 18 brokerages that deal directly with the Fed expect a rate increase.
The euro edged down about 0.1 per cent to US$1.0933 but still up about 0.4 per cent for the week after comments from the European Central Bank's Ewald Nowotny raised doubts about the extent to which US and European monetary policy will diverge.
The dollar added 0.4 per cent against its Japanese counterpart to 122.07 but was still down around 0.8 per cent for the week.
Despite this week's weaker dollar, US crude oil futures continued to wallow close to 2009 lows on oversupply fears, shedding 0.8 per cent to US$36.47 a barrel. Brent skidded 0.7 per cent to US$39.47.
US dollar weakness and lower commodity prices "do not normally come hand in hand as dollar weakness generally drives commodity prices higher but nothing seems to matter more this week than position adjustments," Kathy Lien, managing director at BK Asset Management, wrote in a note to clients.
South Africa's rand, meanwhile, plumbed record lows against the US dollar after the abrupt dismissal of respected Finance Minister Nhlanhla Nene to make room for an ally of President Jacob Zuma.
The rand sunk as low as 15.4895 against the greenback, and was last at 15.3740.