Asian shares off 18-month highs, Trump's yuan comment in focus

The offshore yuan stood flat at 6.8476 per US dollar.
The offshore yuan stood flat at 6.8476 per US dollar.PHOTO: AFP

TOKYO (Reuters) - Asian shares took a breather on Friday (Feb 24), hovering just below 1-1/2-year highs as investors braced for a potentially wobbly session after US President Donald Trump called China "grand champions" of currency manipulation.

Over the past month or so, financial markets have been buffeted by rising protectionism under the Trump administration, and the US President's latest comments on China does little to raise confidence on trade relations between the world's two biggest economies.

His comments came just hours after his new Treasury secretary pledged a more methodical approach to analysing Beijing's foreign exchange practices.

The offshore yuan stood flat at 6.8476 per US dollar. In onshore trade, the yuan fell 6.6 perc ent last year in its biggest drop in over 20 years. All eyes are on the Chinese markets which open shortly.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1 per cent in early trade after four straight days of gains while Japan's yen-sensitive Nikkei was off 0.7 percent.

The MSCI world equity index, which tracks shares in 46 nations, rose 0.15 per cent to 446.69 on Thursday, touching a record peak at 447.67 at one point and extending its gains so far this year to almost six percent.

Leading the gains were emerging markets, which have rallied more than 10 per cent since the start of the year, thanks to signs of a pickup in global economic activity.

On Wall Street, the Dow managed to notch a record high for a tenth straight session, the longest streak since 1987. The streak of gains is the longest for the index since March 2013.

Traders have bet on tax cuts, less regulation and more infrastructure spending from Trump and the Republican-controlled Congress to bolster the US economy.

"There are strong expectations on tax cuts in the U.S. markets. On the other hand, the chance of a Fed rate hike in March seems limited, which is also helping shares," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

US Treasury Secretary Steven Mnuchin on Thursday laid out an ambitious schedule to enact tax relief for the middle class and businesses by August, but added the Trump administration was still studying a border tax.

As Trump has promised a "phenomenal" plan by early March to cut business taxes, many investors expect more clarity when he delivers a speech to Congress on Tuesday.

Wednesday's Federal Reserve minutes, which showed that there was less urgency among voting members to raise interest rates, have helped to drive down US Treasuries yield and the dollar.

The 10-year US Treasuries yield hit a two-week low of 2.372 per cent.

The US dollar slipped to 112.55 yen, also a two-week low, on Thursday and last stood at 112.69 yen.

The euro fetched US$1.0584, off Wednesday's six-week low of US$1.0494.

Oil prices held firm near the top of their trading ranges, thanks to high compliance among the Opec countries to curb output. US crude futures traded at US$54.36 per barrel.