Asian shares were in a buoyant mood yesterday, with Japanese stocks charging toward a five-and-a-half-year peak after the yen fell sharply on the back of relatively positive US economic data, while two major regional currencies slumped.
US jobless claims unexpectedly fell last week and this month’s Thomson Reuters/University of Michigan consumer confidence rating improved from a preliminary reading, while the Chicago Purchasing Managers Index held up better than expected this month after surging last month.
A soft durable goods report for last month was the only dent to an otherwise upbeat set of figures.
“The US economic data were very pro-tapering, despite the weakness in the durable goods data,” wrote Steven Englander, global head of G10 foreign exchange strategy at Citigroup.
The Indonesian rupiah fell to its psychological support at 12,000 to the US dollar, the first time since March 2009.
The currency is seen vulnerable to capital outflows once the US Federal Reserve begins dialing back the massive stimulus that has fueled asset prices in emerging markets.
Investors are focusing more closely on data as they weigh the odds of when the Fed is likely to start unwinding its US$85 billion a month bond-buying campaign. Many investors expect the Fed will begin tapering in the first quarter of next year if the economy continues to improve.
“On tapering and US dollar, we have been struck by how much of the market continues to assign a very low probability of a December or January tapering,” Englander said. “Investors are focused on next week’s labor market release, but the stronger-than-expected data suggests that some revision of probabilities is merited, even going into the numbers.”
The US dollar hit a six-month high of ￥102.28, adding to a 0.8 percent gain overnight and edging closer to a four-and-a-half-year peak of ￥103.74 reached in May.
As the yen tumbled, Tokyo’s Nikkei benchmark climbed 1.2 percent to 15,631.35, closing in on a five-and-a-half-year peak of 15,942.60 reached in May.
The Nikkei is up 50 percent this year in local currency terms, outpacing a 26.7 percent jump on the US S&P 500 and a 16 percent rise in the pan-European STOXX 600.
Investors have been using the yen as a funding currency for carry trades, with the Bank of Japan committed to keeping ultra-loose monetary policy to shore up growth — a contrast with the Fed, which is moving toward a turn in policy.
On Wednesday, Bank of Japan board member Sayuri Shirai said the central bank should consider expanding monetary stimulus even further if economic and price growth deviates sharply from its projections.
The Thai baht dropped to an 11-week low of 32.20 to the US dollar as last month’s manufacturing output fell more than expected, adding to the country’s economic woes as political tensions heighten, although the SET inched up 0.2 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.6 percent, hitting a one-week high. Still, the Asian gauge is only up 1.7 percent so far this year, sharply underperforming the US, European and Japanese markets.
In terms of valuations, the Asian index was cheaper than its major developed market rivals. The MSCI Asia-Pacific ex-Japan index carried a 12-month price-to-earnings ratio of 12, versus the S&P 500’s 14.9, STOXX Europe 600’s 13.5 and Japan’s 14.3, according to Thomson Reuters Datastream.