Asia: Stocks retreat as stronger Yen weighs on Japanese shares

[SINGAPORE] Asian stocks retreated from a six-week high as a strengthening yen pressured Japanese shares, overshadowing gains from energy producers amid a rally in crude.

The MSCI Asia Pacific Index dropped 0.5 per cent to 131.72 as of 3:11 pm in Hong Kong. Global equities headed for a fourth weekly advance, with the S&P 500 Index edging closer to an all-time high amid speculation borrowing costs will remain lower for longer. Federal Reserve Chair Janet Yellen signaled Monday that policy makers won't prematurely raise interest rates. Markets in China, Hong Kong and Taiwan are shut for holidays on Thursday.

"Monetary policy remains accommodative globally and expectations for a rate hike in the US have been pushed back," James Woods, an analyst at Rivkin Securities in Sydney, said by phone. "That should be supportive of equities. However, a delay in the Fed rate hike is strengthening the yen, providing a headwind for Japan." Central banks are in the spotlight, with policy decisions from the Fed and the Bank of Japan scheduled for next week. Futures traders lowered the possibility of a US interest rate hike by July to 18 per cent after Ms Yellen said on Monday that the world's biggest economy is strengthening enough to withstand gradual increases in borrowing costs.

The Reserve Bank of New Zealand left the benchmark interest rate unchanged for a second straight meeting on Thursday and signaled there may be a need for further easing. South Korea's central bank unexpectedly cut the key interest rate to a record low amid concern the government's push to restructure indebted companies is putting pressure on the economy.

Japan's Topix index dropped 1 per cent as the yen headed for a third day of gains against the dollar. Japanese stocks volumes have languished since the start of May as investors await a monetary policy decision from the BOJ on June 16, a day after the Fed's meeting.

BLOOMBERG