HONG KONG (AFP) Most Asian markets suffered rare losses on Wednesday (Jan 24) as investors took a breather from a rally that has sent Hong Kong to record highs and Tokyo to levels not seen in more than a quarter of a century.
Optimism about the global economy - which was reinforced this week by the International Monetary Fund - strong earnings reports and Donald Trump's tax cuts have helped fuel a surge in global equities, which many expect to continue.
Increasing expectations that central banks around the world are on course to wind in their crisis-era stimulus continued to weigh on the dollar, which the pound hitting new post-Brexit vote highs and the yen at its strongest since September.
"The earnings season is going phenomenally well, and the government shutdown on Friday was reversed (on Monday) so we've got the government behind us for the next couple of weeks," Phil Orlando, chief equity market strategist at Federated Investors, told Bloomberg News.
"But the reason the stock market is up is very simply that investors are reflecting on the fact that earnings are much better than expected."
Adding to the buying spree in equities is what some analysts describe as the "fear of missing out" on the money-making rally.
However, in early trade Hong Kong, which has continued to rise after last week breaking its all-time high, eased 0.3 per cent. Shanghai slipped 0.2 per cent.
Tokyo shed 0.6 per cent by the break as the stronger yen hurt exporters.
Singapore was 0.1 per cent off and Taipei fell more than one percent while Manila lost 0.5 per cent. Jakarta retreated 0.6 per cent after hitting a fresh record on Tuesday.
But Sydney added 0.3 per cent while Seoul was flat.
On currency markets the dollar sell-off continued as investors bet on tighter monetary policies by major central banks, bringing them in line with the Federal Reserve.
Sterling held above the US$1.40 mark it broke Tuesday on the improving chances of a "soft" British exit from the European Union.
"The rumours of a softer stance from Belgium have helped the move from a pound perspective, but this move is undoubtedly a US dollar decline," said James Hughes, chief market analyst at AxiTrader in Britain.
The euro was at three-year highs ahead of the European Central Bank's latest policy meeting, which will be pored over for clues about its policy stance, while a strong reading on German investor confidence also provided a boost.
The greenback fell below 110 yen for the first time since September as data showing a strong trade overshadowed the Bank of Japan's decision Tuesday not to tighten monetary policy just yet, nor provide a timetable for such a move.
"The big challenge for the BoJ is how to deal with investors' expectations as any tweak in policy will be viewed as an opportunity to hammer the (dollar) mercilessly lower" against the yen, said Stephen Innes, head of Asia-Pacific trading at OANDA.
Most other high-yielding currencies were also higher, with the Australian dollar up 0.5 per cent and China's yuan 0.2 per cent higher to sit at more than two-year highs.
As well as the ECB meeting, attention is also this week on the Davos meeting of business and political elites, where Mr Trump is due to speak before the weekend.