Asian shares gained on Thursday, taking heart from a late recovery on Wall Street and from reassurances from China’s central bank that there was no basis for further yuan depreciation after it devalued the currency earlier this week.
Financial spreadbetters expected the brighter mood to extend to European bourses.
Britain’s FTSE 100 .FTSE was seen opening around 45 points higher, or 0.7 percent; Germany’s DAX .GDAXI was seen opening around 150 points higher, or 1.4 percent; and France’s CAC 40 .FCHI was seen to open around 80 points higher, or 1.6 percent.
China’s central bank said that there was no basis for more yuan depreciation in light of strong economic fundamentals, even though the yuan dropped for the third straight day following Beijing’s move to devalue the currency on Tuesday.
The People’s Bank of China (PBOC) set its guidance rate CNY=SAEC at 6.4010 per dollar prior to the market open, weaker than the previous fix of 6.3306. The gap between the guidance rate and the traded spot market rate narrowed sharply as the central bank tried to curb the yuan’s slide.
Still, traders remain cautious about how low the yuan might go. Sources told Reuters some powerful voices in the government are pushing for an even deeper devaluation to help China’s struggling exporters.
PBOC Vice-governor Yi Gang dismissed such talk as groundless, but that did not convince market participants that Chinese authorities would refrain from allowing the yuan to slip further over time given weakness in the economy.
For now, though, banking sources said the People’s Bank of China had stepped up its intervention in yuan trading in a bid to stabilize prices.
“There is a degree of calm returning to the market,” said Mitul Kotecha, head of Asia-Pacific FX strategy for Barclays in Singapore. “The market certainly perceives that the Chinese authorities don’t want the CNY to weaken too dramatically.”
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.6 percent, after U.S. shares rebounded and two out of three main indexes end in positive territory.
Japan’s Nikkei stock index .N225 shrugged off early losses and downbeat capital expenditure figures to end up 1 percent.
Japan’s core machinery orders fell a greater-than-expected 7.9 percent in June, down for the first time in four months and adding to fears that data on Monday will show the economy shrank in the second quarter.
The risk-averse mood after China’s moves this week had heightened the appeal of safe-haven government debt, which then pushed down U.S. Treasury yields and pressured the U.S. dollar.
But benchmark 10-year note prices fell from three-month highs after a lackluster auction, with the 10-year yield at 2.162 percent US10YT=RR in Asian trading, compared to its U.S. close of 2.130 percent.
The dollar also suffered as investors pared back bets that the U.S. Federal Reserve’s long-awaited interest rate hike would come as early as its Sept. 16-17 meeting.
Short-term U.S. interest rates markets indicated investors were pricing in no more than a 40 percent chance that the Fed will raise rates next month.
“Pressure to unwind dollar long positions is mounting and focus is on how long this trend will continue. ‘China risk’ has dampened hopes for a September rate hike and upcoming data could further chip away at expectations for a Fed tightening,” said Junichi Ishikawa, market analyst at IG Securities in Tokyo.
Against the yen, the dollar was about 0.2 percent higher at 124.46 JPY=. The euro edged down about 0.1 percent to $1.1143 EUR= after scaling a one-month peak of $1.1215 on Wednesday, helped by the unwinding of euro-funded carry trades in the yuan EURCNH= and other emerging market currencies.
In commodities trading, spot gold XAU= was down about 0.3 percent at $1,120.80 an ounce after logging its fifth straight session of gains.
Three-month copper on the London Metal Exchange CMCU3 fell about 0.3 percent to $5,177 a tonne, moving back toward the previous session’s six-year low of $5,062 a tonne.
Crude oil futures extended overnight gains made on lower U.S. crude stockpiles, but remained not far from six-year lows plumbed this week on fears that China’s weaker currency would hit imports. U.S. crude CLc1 was up about 0.4 percent at $43.45 a barrel, while Brent LCOc1 added about 0.5 percent to $49.89.
Source: Reuters
