Tokyo: Asian stocks edged closer to a 22-month high on Friday, supported by strong US retail sales data, while the yen retreated against major currencies after rising the previous day on talk that China is likely to allow a modest appreciation in the yuan.
The yen was under pressure after news that Prime Minister Yukio Hatoyama will meet with Bank of Japan Governor Masaaki Shirakawa around 0300 GMT to discuss the economy and financial situation.
“An announcement on monetary policy out of this meeting is unlikely, but the event is probably for the government to make an additional request to the Bank of Japan for more easing steps, providing a yen-selling factor,” said a trader for a Japanese bank.
The MSCI’s broad measure of shares in the Asia-Pacific outside Japan rose 0.33%, staying near levels last seen in June 2008 hit on Wednesday and bringing gains since the beginning of the year to more than 4%.
Seoul shares slipped 1.3% as a strengthening won dented appetite for key exporters such as Hyundai Motor, while reaction to the Bank of Korea’s decision to hold its interest rate was limited.
Tokyo’s Nikkei average was flat, with profit-taking after the benchmark’s recent rally to 18-month highs offsetting strong earnings guidance from the likes of popular casual clothing chain Fast Retailing.
The Nikkei has gained nearly 6% so far this year.
Better-than-expected US retail sales data helped support sentiment, but gains are likely to be kept in check ahead of US earnings next week from heavyweights such as Intel Corp with investors mindful of longer-term uncertainty about the US economic recovery and simmering worries about debt-laden Greece.
“Though market attention has shifted to earnings, the Japanese season doesn’t really get going for another two weeks, meaning the market may search for direction,” said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.
“But with few strong reasons to sell at this point, any falls are likely to be limited.”
On Thursday, top US chains reported a record year-over-year increase in same-store sales for March, sending the S&P 500 Index 0.3% higher. The sales reflected a boost in consumer demand that some investors had doubted would materialise, with job growth still anemic.
The greenback rose 0.1% to ¥93.47 after the market found solid bids below 93 yen on Thursday when it fell as far as ¥92.83. Asian currencies are seen likely to gain from any move by China to revalue its currency.
Speculation about a firmer Chinese yuan has reached fever pitch since The New York Times said China was close to announcing a shift in policy involving a “small but immediate” yuan revaluation.
On Thursday, US Treasury Secretary Timothy Geithner and Chinese Vice Premier Wang Qishan exchanged views on US-China economic relations and the global economy during a meeting in Beijing.
The euro rose earlier as investors trimmed record-high short positions, but it struggled to keep those gains as worries about debt-laden Greece simmered in the background.
The single currency was steady at $1.3360, having lost about 7% since the beginning of the year.
Commodity prices were steady, with U.S. crude futures rising towards $86 a barrel, after falling the two previous days, while Gold ticked higher, hovering near a 3-month high hit the previous day.
The Japanese government bond yield curve remained under flattening pressure as the superlong sector stayed bullish on continuing purchases from investors such as life insurers.
Mitsui Life Insurance Co said in an interview with Reuters on Thursday that Japan’s fifth-largest life insurer is likely to buy 100 billion yen ($1.07 billion) in superlong bonds in the current financial year.
Investor interest in emerging markets and their commodities stories jumped during the first week of April, data from fund tracker EPFR Global showed on Thursday, with flows into EPFR Global-tracked emerging markets equity funds hitting a 24-week high.
Emerging Markets Bond Funds extended their inflow streak to 22 straight weeks and Commodity Sector Funds absorbed another $265 million, EPFR said, but Japan Equity Funds posted outflows for the first time this year as a stronger yen and disappointed business investment numbers offset bullish expectations for the first quarter earnings season.