The dollar strengthened against most Asian currencies, while stocks in Australia and South Korea dropped after the Federal Reserve indicated economic stimulus may be cut in coming months. Japanese shares jumped as gold and silver rebounded while crude oil declined.
The Bloomberg U.S. Dollar Index climbed a second day, rising 0.2 percent by 9:54 a.m. in Tokyo as the greenback strengthened at least 0.3 percent versus the yen, Malaysian ringgit and Korean won. The MSCI Asia Pacific Index lost 0.1 percent, while Japan’s Topix Index climbed 0.9 percent. Standard & Poor’s 500 Index (SPA) futures were little changed. Gold rose from a four-month low and silver halted a three-day drop as West Texas Intermediate oil fell 0.2 percent to $93.66 a barrel.
The Fed expected economic data to signal ongoing improvement in the job market and “thus warrant trimming the pace of purchases in coming months,” minutes of U.S. policy makers’ October meeting showed. Fed Bank of St. Louis President James Bullard also stoked speculation over tapering, saying a reduction in bond buying is possible in December. A private index today may show Chinese manufacturing growth slowed last month, while the Bank of Japan reviews monetary policy.
“The market is still feeling very twitchy about it, and there’s a feeling around that the Fed is starting to see the cost of ongoing quantitative easing mounting,” Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd., which oversees $135 billion under management, said by phone. “The environment in China has become more friendly towards risk and more friendly toward the share market. But it’s not completely out of the woods yet and there’s still uncertainty around.”
The HSBC Holdings Plc/ Markit Economics purchasing managers’ index on Chinese manufacturing will probably come in at 50.8 for November from 50.9 in October, according to the median of 18 economists’ estimates compiled by Bloomberg. Readings above 50 signal expansion. Reserve Bank of Australia Governor Glenn Stevens is scheduled to speak today in Sydney.
The Bloomberg dollar index, which tracks the greenback against 10 major peers, snapped a three-day decline yesterday, rising 0.4 percent. The yen lost 0.4 percent to 100.44 per dollar today, while the won slumped 0.3 percent to 1,060.91 per dollar in a second day of declines. The ringgit slid 0.5 percent to 3.1865 a dollar and the Thai baht weakened 0.4 percent.
The euro was little changed at $1.3421 after sliding 0.7 percent versus the dollar yesterday, the biggest one-day decline this month.
The European Central Bank is weighing a negative deposit rate to ward off inflation, according to people with knowledge of the debate who asked not to be identified as the talks aren’t public. ECB policy makers would reduce the rate for commercial lenders who park excess cash at the bank to minus 0.1 percent from zero, said the people.
ECB President Mario Draghi speaks in Berlin today and PMIs on manufacturing and services in the euro region are due to be released.
Ten-year Treasury yields were little changed at 2.81 percent, after rising nine basis points, or 0.09 percentage point, yesterday to the highest close since Sept. 17.
Fed Bank of St. Louis chief Bullard said that a reduction in the Fed’s $85 billion-a-month in asset purchases is “on the table” for the Federal Open Market Committee’s December meeting. Bullard, a voter on policy this year who has backed the Fed’s record stimulus, said that a strong jobs report could increase the chance of a reduction in bond purchases next month.
“It’s definitely on the table, but it’s going to depend on the data,” Bullard said in a Bloomberg Television interview with Erik Schatzker. “A strong jobs report, I think, would increase the probability some for a December taper.” The government’s jobs report for November will be released Dec. 6.
As of Nov. 19, four of five investors expected the Fed to delay a decision on the first cuts to bond buying until March 2014 or later, with 5 percent looking for a move next month, according to the latest Bloomberg Global Poll. Only one in 20 said the central bank will begin to reduce its purchases at its Dec. 17-18 meeting, according to the poll yesterday of investors, traders and analysts who are Bloomberg subscribers.
Janet Yellen, nominee to replace Ben S. Bernanke as Fed Chairman, told her Senate confirmation hearing last week that she’ll ensure stimulus isn’t removed too soon.
Australia’s S&P/ASX 200 Index lost 0.4 percent in a fourth day of declines, the longest slump since August, while the Kospi Index in Seoul dropped 0.7 percent, falling a second day. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York retreated 0.9 percent.
Silver climbed 0.4 percent to $19.9445 an ounce after falling to the lowest close since Aug. 7 yesterday, while palladium and platinum added 0.2 percent. Gold gained 0.3 percent to $1,248.37 an ounce following yesterday’s 2.5 percent slide.
Natural gas futures declined 0.2 percent after surging 3.3 percent to lead commodity gains yesterday. Gasoline gained 0.4 percent in a second consecutive rising day.
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