Asian equities slid after data last week showed a sharp drop in US fourth-quarter growth, and on worries that Washington may need to extend additional help to an ailing financial sector.
The US dollar climbed against major currencies other than the yen and extended its recent gains against the South Korean won to hit another 11-year peak.
Stock markets in Asia fell broadly, with the MSCI index of Asia-Pacific stocks outside Japan hitting a three-month low and US S&P 500 futures falling 1.4 percent.
“This may be a risk aversion play again and the dollar usually does well in these,” said Jan Lambregts, economist at Rabobank International in Hong Kong.
The dollar rose broadly after sources said the US government would pour a further US$30 billion into embattled insurer American International Group, fueling safety buying of the US currency.
The AIG move follows a new rescue plan for Citigroup, adding to fears that more financial firms may need similar rescue plans, analysts said.
“The market has become increasingly concerned that the need for rescues is broadening to other major US banks after Citigroup and AIG,” said Kengo Suzuki, a currency strategist for Shinko Securities.
The euro fell 0.3 percent to US$1.2585 and the pound fell 0.6 percent to US$1.4223. The dollar eased 0.1 percent to ¥97.58, pulling further away from a three-month high of ¥98.72 last week.
The dollar index, which measures its performance against a basket of major currencies, rose 2.7 percent last month, even as the S&P 500 slid nearly 11 percent.
“I am convinced that one of the underlying core elements is that US companies are repatriating money. There’s deleveraging going on. That’s benefiting the dollar, for sure,” Lambregts said on the dollar’s recent rise.
The MSCI index of Asia-Pacific stocks outside Japan slid 3.6 percent yesterday to 206.48 and hit its lowest levels since late November, when it hit a five-year low of 194.03.
Besides worries about the US financial sector, Asian shares slumped after data on Friday showed the US economy shrank at an annual rate of 6.2 percent in the fourth quarter, its deepest contraction since early 1982.
“As the US economy gets worse, Japan and other Asian economies will be hit one to two times harder since manufacturers will take a hit,” said Masayoshi Okamoto, chief of dealing at Jujiya Securities in Tokyo.
Japan’s Nikkei stock average slid 3.2 percent, with Mitsubishi UFJ Financial Group and other banks sinking on fears about their US peers, while exporters fell on worries over the US economy.
In South Korea, the Kospi stock index fell 4.4 percent to 1,016.77 at 1:47pm in Seoul.
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