Asian shares creep higher as investors await yuan fixing

Pedestrians stand before a markets indicator board in Tokyo, Japan, Aug 12,2015.
Pedestrians stand before a markets indicator board in Tokyo, Japan, Aug 12,2015. PHOTO: EPA

TOKYO (REUTERS) - Asian shares and the dollar crept higher in early trade on Thursday, with investors cautiously watching China's next move after it allowed the yuan to decline for two straight sessions.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3 per cent, taking heart from a late recovery on Wall Street that saw two out of three main indexes end in positive territory.

Japan's Nikkei stock index was up 0.3 per cent, shrugging off downbeat capital expenditure figures.

Japanese data released before the market open showed Japan's core machinery orders fell a greater-than-expected 7.9 per cent in June, down for the first time in four months.

China's currency fell to a four-year low on Wednesday, slumping for a second day.

Sources told Reuters that the move to devalue the yuan reflects a growing clamour within Chinese government circles for a devaluation of perhaps up to 10 per cent to help struggling exporters.

"The continued weakness in China growth will provide more pressure for CNY depreciation, in our view," Barclays strategists said in a note to clients.

The risk-averse mood after China's moves this week heightened the appeal of safe-haven government debt, which has pushed down US Treasury yields and pressured the U.S. dollar.

But benchmark 10-year note prices fell from three-month highs after a lacklustre auction, with the 10-year yield at 2.139 per cent in Asian trading, compared to its U.S. close of 2.130 per cent.

The US dollar also weakened as investors pared back bets that the US Federal Reserve's long-awaited interest rate hike would come as early as its Sept. 16-17 meeting. Short-term US interest rates markets indicated investors were pricing in no more than a 40 per cent chance that the Fed will raise rates next month.

Against the yen, the dollar was slightly higher at 124.30 . The euro was steady at US$1.1155 after scaling a one-month peak of US$1.1215 on Wednesday, helped by the unwinding of euro-funded carry trades in the yuan and other emerging market currencies.

In commodities trading, spot gold was steady at US$1,123.81 an ounce after logging its fifth straight session of gains.

Crude oil futures extended overnight gains made on a weaker dollar and lower US crude stockpiles, but remained not far from six-year lows plumbed this week on fears that China's weaker currency would hit imports. US crude was up about 0.3 per cent at US$43.43 a barrel, while Brent also added about 0.3 per cent to US$49.83.