HONG KONG - Asian shares dropped with US index futures while sovereign bonds rallied and gold traded near a four-month high as the market turmoil sparked by Switzerland abandoning the franc's cap extended into a second day.
Japan's Topix index fell 1.8 per cent, putting it on track for a 2.1 per cent drop in the week. The Kospi index in Seoul retreated 1.2 per cent. Hong Kong's Hang Seng Index slid 0.6 per cent and the Hang Seng China Enterprises Index was 0.7 per cent lower.
The Straits Times Index was trading down 29.10 points, or 0.87 per cent, at 3,309.74 at about 10:40am.
The Swiss Market Index slumped 8.7 per cent Thursday, its biggest one-day drop since 1989.
The franc was near parity with the euro, after trading at 1.20096 per euro immediately before the Swiss National Bank (SNB) announcement on Thursday.
The SNB move sparked mayhem on trading floors and increased speculation that the European Central Bank may unveil a broader programme of stimulus when it meets next week. FXCM Inc., the third-largest currency broker for retail clients, said it may have breached some capital requirements after clients got caught out by the franc surge, while a New Zealand currency brokerage said it would close due to losses. The euro area reports final December consumer prices figures on Friday (Jan 16).
"The SNB caught almost everyone by surprise and it's creating unease and anxiety in markets," said Nader Naeimi, who helps manage about US$125 billion as Sydney-based head of dynamic asset allocation at AMP Capital Investors. "The strategy is capital preservation for now, buying gold to hedge against the volatility which is going to continue."
Gold was little changed at US$1,261.28 an ounce on the spot market on Friday, after jumping 2.8 per cent on Thursday in its steepest one-day climb since Dec. 1.
The SNB also deepened negative deposit rates, underscoring Europe's divergence with the US, where the Federal Reserve is mulling rate rises.
The franc's surge versus the euro ranked as one of the biggest moves among major currencies since the collapse of the Bretton Woods system in 1971. The Swiss currency reached 85.172 centimes per euro last session, its strongest level since the euro's 1999 debut and climbed against all of its major and emerging-market counterparts.
The 19-nation euro was little changed at US$1.1633 after falling 1.3 per cent Thursday, and is headed for a fifth straight weekly drop, down 1.9 per cent versus the greenback.