Taipei: Asian stocks fell on Wednesday, with Japan’s Nikkei at a 16-month low, as investors sold riskier assets after a spate of worrying US economic data, while the yen slipped from a 15-year high on a report Tokyo was considering weakening its currency.
But even if Japan’s government acted alone to try and halt yen strength, dealers were sceptical it could reverse the growing unwillingness among investors to take risks that has underlied the yen’s 10 percent rise against the dollar so far this year.
“The dollar went to ¥83, so the chance of intervention has increased, but it would take more than intervention,” said Kiichi Murashima, economist at Citigroup Global Markets in Tokyo.
“It has to be coupled with easing by the BOJ to have any impact,” he said, referring to any further monetary policy easing by the Bank of Japan.
The dollar rose 0.6% against the yen to ¥84.37 on short-covering, having pulled up from a 15-year low of ¥83.58 hit on trading platform EBS on Tuesday.
Adding to investors’ worries about exposure to riskier assets, key US stock indexes fell as much as 1.7% overnight after an unexpected plunge in existing home sales amplified fears that the economy could be sliding into a prolonged period of stagnation or even recession.
Chicago Federal Reserve Bank President Charles Evan said the risks of a double-dip US recession have risen in the last six months. While he added he did not think that was the most likely scenario, he said high unemployment and a fractured housing sector would make the recovery a fragile one.
US stock futures, though, were up 0.3% on Wednesday, with bargain hunters expected to provide some support.
That eased the blow on Asian stock markets, but an unmistakable falling trend in government bond yields around the world reflected deep unease about the prospect of another recession.
Japan’s Nikkei share average fell 0.85% after earlier hitting the lowest since May 2009.
Shares of exporters such as Honda Motor Co, which was down around 2%, have been stung by the rising yen. The currency’s strength has blown past many exporters’ assumptions for the year, threatening to crimp profits even as global demand appears to be cooling.
The MSCI index of Asia Pacific stocks outside Japan slipped 0.35%, led by sectors most sensitive to business cycles such as raw materials and technology.
However, the index, which is down 3.6% on the year, has held up better than the all-country world index, which has fallen 7.1%.
Asia’s relative growth advantage over Western economies has been a buffer against recent shocks, with emerging markets managing to keep attracting portfolio investment.
India’s stock market, for example, has absorbed $8 billion in foreign equity inflows since June, TrimTabs Investment Research said in a report.
Caution on the yen initially stemmed from a Nikkei business daily report saying Japan’s Ministry of Finance may consider unilateral yen-selling intervention without the blessing of other advanced economies if speculators drive up the currency.
Finance Minister Yoshihiko Noda reinforced that view, telling reporters on Wednesday that recent yen moves were one-sided and Tokyo will respond appropriately when necessary. The euro rose 0.2% to $1.2652, mostly ignoring Standard & Poor’s sovereign credit rating downgrade of Ireland.
The possibility of additional easing by the Federal Reserve has hurt the dollar’s attractiveness, but persistent concerns about Europe’s fiscal health have prevented investors from running to the euro en masse.
Japanese government bonds extended gains as investors moved into less risky assets, with the benchmark 10-year yield touching a fresh seven-year low, as the yen’s surge nudged up the previously negligible chances of monetary policy easing by the Bank of Japan before its rate review next month. The most likely move by the BOJ would be simply to increase the amount or extend the time period of a fixed-rate fund supply operation to banks, but market watchers doubt that would do much to halt the yen’s climb or spur more bank lending to boost the fragile economy.