Gold falls with yen as haven-asset flight eases

[SYDNEY] The flight to haven assets eased following the biggest drop in the dollar since July with moves in the yen, Treasuries and gold steadying ahead of Donald Trump's inauguration. Hong Kong shares rallied with emerging-markets assets.

Gold and the yen fell for the first time in eight days. Chinese equities gained amid speculation of state efforts to ensure market stability during President Xi Jinping's appearance at the World Economic Forum in Davos.

Hong Kong's Hang Seng continued its run to the highest level since the start of November. Tokyo shares sank with those in Sydney and Taipei, following losses on the S&P 500 index, while stocks in Jakarta and Manila rose.

Politics have impacted heavily on global markets in 2017 with traders assessing the significance of Mr Trump's comments that the US dollar is too strong ahead of his inauguration on Friday.

The US currency rose after Federal Reserve San Francisco President John Williams said the US economy has reached its maximum employment goal and gradual interest rate increases will likely be appropriate.

Meanwhile, trading firms are reaping the rewards from stronger currencies and bond-trading in the wake of the US election, with Morgan Stanley saying momentum from a strong fourth quarter continued into the first weeks of 2017.

"Trump has made a lot of announcements but people are waiting for that to translate into implementation and some policy around that," Paul Harris, a Toronto-based fund manager at Avenue Investment Management, told Bloomberg TV.

"This is the time when you might have some slight volatility."

The Chicago Board Options Exchange Volatility Index rose 5.7 per cent on Tuesday to the highest level of this year. A similar gauge for the Nikkei Stock Average slipped 0.2 per cent on Wednesday after jumping 15 percent over the previous two days.

Stocks

The MSCI Asia Pacific Index added 0.1 per cent as of 12:18pm in Tokyo. Australia's S&P/ASX 200 fell 0.6 per cent. The Hang Seng added 1.1 per cent as property shares climbed. The Shanghai Composite advanced for a second day.

Japan's Topix lost 0.4 per cent, declining for a third day. Futures on the S&P 500 rose 0.1 per cent. The underlying gauge lost 0.3 per cent on Tuesday.

The Jakarta Stock Exchange Composite Index rose 0.4 per cent as BlackRock says Indonesia remains most favoured market due to its cyclical recovery.

Currencies

The Bloomberg Dollar Spot Index added 0.2 per cent after retreating 1.3 per cent on Tuesday to the lowest in a month. The yen slid 0.4 per cent to 113.04 per US dollar, after soaring 3.9 per cent over the previous seven days.

The Aussie fell 0.3 per cent to 75.44 US cents. It's had the best run among G-10 currencies since the start of the year, up 4.9 per cent.

The won climbed as much as one per cent against the US dollar, while the Malaysian ringgit advanced 0.4 per cent. The pound retreated 0.6 per cent to US$1.2341 after surging 3.1 per cent on Tuesday.

Commodities

Gold lost 0.2 per cent, snapping a seven-day winning streak that was the longest since November.

Iron ore futures slid 1.3 per cent, also ending a seven-day stretch of gains.

BLOOMBERG