HONG KONG: The yen strengthened further Thursday on worries about the global economy and Japanese stimulus, while stock traders moved cautiously ahead of the release of US jobs data at the end of the week.
Japanese Prime Minister Shinzo Abe on Wednesday said he would put back by more than two years a planned sales tax increase that threatened the country’s torpid economy.
However, while the move would give the government and central bank breathing room to kickstart growth, he failed to come up with any detailed plans to do so, while analysts said the delay had dampened any chance of any near-term stimulus measures.
“There’s now less chance of more Japanese monetary policy, particularly when Abe said he’s thinking about doing more fiscal initiatives,” Tony Farnham, Sydney-based analyst at Patersons Securities, told Bloomberg News. “That should have the US dollar on the back foot for a period of time.”
In morning trade the dollar bought 109 yen, down from 109.53 yen Wednesday and well off the levels above 111 yen seen earlier in the week.
The stronger currency hit Japan’s Nikkei index as exporters sank, with the bourse down 2.3 percent by the break.
Investors were also pushed towards the yen — which is considered a safe bet in times of crisis — by worries about Britain’s future in the European Union after a poll showed a majority of voters favoring an exit.
There is widespread expectation that a break from the 28-country union will spur significant market turmoil and slow or stall the British economy. The pound was at $1.4426, down from $1.4478 Wednesday and well off the $1.4636 Monday.
Attention is now turning to the Friday release of a US jobs report, with a strong reading likely to raise expectations the Federal Reserve will lift interest rates when it meets for its next policy meeting this month.
Equity dealers remain wary, with markets moving in an out of positive territory. Hong Kong was flat in the morning, Shanghai edged up 0.2 percent, Sydney fell 0.9 percent and Seoul was 0.1 percent higher.
“Caution looks set to remain supreme ahead of this week’s payrolls report,” Cameron Bagrie, chief economist in Wellington at ANZ Bank New Zealand Ltd., said in a client note.
“Modest economic signals out of the US set the tone and maintain the market erring toward rates moving up, but not really excitable enough to buoy the dollar.”
Key figures at 0300 GMT
Tokyo – Nikkei 225: DOWN 2.3 percent at 16,568.12 (break)
Shanghai – Composite: UP 0.2 percent at 2,918.22
Hong Kong – Hang Seng: UP 8.87 points at 20,769.85
Euro/dollar: UP at $1.1195 from $1.1187 on Wednesday
Dollar/yen: DOWN at 109.00 from 109.53 yen
New York – Dow: FLAT at 17,789.67 (close)
London – FTSE 100: DOWN 0.6 percent at 6,191.93 (close)