Hong Kong: Asia stock markets edged up on Monday and the dollar retreated after the US government’s $17.4 billion of rescue loans to ailing automakers last week gave investors more reason to wade into riskier assets.
Higher-yielding currencies such as the Australian dollar gained against the yen after the Bank of Japan last week followed the US Federal Reserve in cutting interest rates to nearly zero and vowing to buy troubled assets and help thaw credit markets.
Japan’s Nikkei average climbed 1.4% on the BoJ actions and as Tokyo joined governments worldwide in pledging $54 billion of spending to help pull the economy out of recession.
The need for government action to stem the deep economic recession was highlighted by data showing Japanese exports tumbling at a record annual pace in November.
Hopes for more stimulus to help the real estate market helped briefly lift South Korea’s KOSPI index to a 6-week high, led by gains in builders like Donyang Engineering & Construction.
“We expect the upward trend will continue. The US auto plan cleared market uncertainties over the US automakers,” said Daishin Securities strategist Kwak Byung-ryel in Seoul.
Japanese government bonds extended gains after the BoJ upped the amount of debt it would purchase each month as part of its monetary easing measures, even as US Treasuries retreated on the gains in Asian stocks and US stock futures.
The MSCI index of Asia-Pacific stocks outside Japan edged up 0.2%, before paring gains. But for the year, the index is still down 52%.
Portfolio managers have kept shifting funds into Asian equity markets in a sign of more tolerance for risk. Data from EPFR Global showed Asia ex-Japan funds received a fifth straight week of inflows in the week ending last Wednesday.
The dollar and yen dipped against the euro as currencies offering higher-yields benefited from the gradual reemergence of risk-taking as a brutal 2008 draws to a close.
The dollar bounced back on Friday after sliding to a 13-year low against the yen and a three-month low against the euro last week, with investors expecting European policymakers to be more reluctant to cut rates from 2.5%.
Market players also covered some of their hefty bets against the euro going into the end of the year, helping drive the single European currency up nearly 8% against the dollar in just three trading days last week.
Analysts said the dollar’s woes were starting to reflect the bleaker outlook for the world’s biggest economy.
“The picture that the currency market is painting for the U.S. economy next year is not as hopeful as the one in the stabilising stock markets,” said Kengo Suzuki, a currency strategist at Shinko Securities.
The Australian dollar dipped slightly against the U.S. dollar to $0.6805, but rose 0.7% to 61.25 yen.
The Aussie was also underpinned by rising commodity prices.
U.S. crude oil for February delivery was up 81 cents at $43.17 a barrel, well above the slide in the January contract to below $33 last week.
Safe-haven government bonds were mixed.
March JGB futures climbed 0.25 point to 139.93 and hit a three-month high of 140.14, while the benchmark 10-year yield dipped 1 basis point to 1.215% and was near a 3-1/2-year low hit on Friday.
But Treasuries slipped. Ten-year notes were down 3/32 in price to yield 2.137%, up 1 basis point from late US trade Friday and off the five-decade low of 2.040% touched last week.
Long-term Treasury yields plunged after the Fed reiterated that it was considering buying such bonds as part of its efforts to revive bank lending and credit markets to help the economy.