Asia stocks rise, US dollar clobbered as US data points to cautious Fed

A pedestrian looks at an electronic board displaying various countries' stock market indices outside a brokerage in Tokyo.
A pedestrian looks at an electronic board displaying various countries' stock market indices outside a brokerage in Tokyo. PHOTO: REUTERS

SINGAPORE (REUTERS) - Asian stocks rose on Monday (July 17) after the Dow and S&P 500 hit record highs on Friday on bets the Federal Reserve's accommodative monetary policy will continue following lacklustre US data, with that view sending the US dollar reeling to a 10-month low.

The Singapore dollar rose against the US currency, with one US dollar tarding at S$1.3699 at 9:05am on Monday, down 0.4 per cent from its close on Friday of S$1.3749.

Markets are awaiting China's second-quarter gross domestic product, due at 10am Singapore time. Economists expect the economy to have expanded 6.8 per cent from a year earlier, cooling from the previous quarter's 6.9 per cent pace.

A surprisingly upbeat reading would likely lift stocks and global commodity prices, but a weak outcome could boost bearish bets on the yuan, which has gained about 2 percent against the dollar so far this year.

MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.2 per cent early on Monday. Japan's Nikkei rose 0.1 per cent. Australian shares were 0.1 per cent lower, while South Korea's KOSPI jumped 0.5 per cent.

Wall Street closed higher on Friday, after data showed consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and subdued expectations of strong economic growth in the second quarter.

The chances of a rate hike in December fell to 43.1 per cent after the data came out from 55 per cent late Thursday, according to the CME Group's Fedwatch tool.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, hit a 10-month low early on Monday. It was trading at 95.102, marginally lower than its close on Friday, when it lost 0.6 per cent.

"Friday's US data led to more USD selling," Stephen Innes, senior trader at OANDA, wrote in a note. "With less than a 50 per cent December rate hike probability priced in, and with no supportive Fed speak on the calendar before July 26th, the dollar could struggle."

US 10-year Treasury yields, however, which fell to as low as 2.279, recovered to end at 2.3319 per cent on Friday.

The dollar was also steady at 112.45 yen early on Monday, after closing down 0.7 per cent on Friday.

The Bank of Japan is expected to keep its monetary policy settings unchanged when it meets on Wednesday and Thursday.

The weakness in the dollar saw other currencies soar, with the Australian dollar hitting its highest level in over two years and the Canadian dollar touching a one-year high early on Monday.

The Aussie was trading little changed from its Friday close at US$0.7824, following a 1.3 per cent surge, and the loonie was flat at US$1.2642, retaining Friday's 0.6 per cent jump.

The euro was also steady at US$1.1474, close to its highest in a year hit last week, after gaining 0.6 per cent on Friday.

In commodities, oil inched higher, extending last week's gains on signs of lower US inventories and higher Chinese demand.

US crude rose 0.1 per cent to US$46.61 a barrel in early trade.

Global benchmark Brent added 0.15 per cent to US$49.

The dollar's loss was gold's gain, with the precious metal rising on Friday. Spot gold was 0.2 per cent higher at US$1,230.70 an ounce.