Asian stocks edge up, kiwi flies as central bank stands pat

Reuters News
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Posted: Jun 08, 2016 8:43 PM

By Shinichi Saoshiro

TOKYO (Reuters) - Asian stocks edged up on Thursday after modest gains on Wall Street overnight, while a weaker dollar buoyed commodities such as gold and crude oil.

The New Zealand dollar soared to a one-year high after the nation's central bank kept interest rates steady as expected, even as some in the market had wagered on a cut.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent.

South Korea's Kospi edged up 0.3 percent after the Bank of Korea unexpectedly cut its policy rate to a record low 1.25 percent amid weak inflation and stagnant exports. It may also be looking to cushion the economy as the government drives a major overhaul of the struggling shipping and shipbuilding industries that could see large job losses.

"Many expected the U.S. Federal Reserve to hike rates in June or July but after the May (U.S.) jobs data a June hike now seems impossible. The BOK probably thought taking action before the Fed's rate hike would be safer," said Lee Sur-bee, fixed income analyst at Samsung Securities.

The Nikkei pulled back 1 percent, weighed down by a stronger yen. Financial markets in Hong Kong and China were closed for holidays.

On Wall Street, the Dow gained 0.4 percent overnight, rising above 18,000 for the first time since April as a weaker dollar lifted some commodity-related shares. [.N]

Investors have been stepping back into riskier assets globally over the past week after last Friday's worse-than-expected U.S. non-farm jobs report. Markets believe the weak job reading sharply reduced the chance that the Federal Reserve will raise interest rates this summer, which has taken some steam out of the dollar.

The greenback slipped 0.3 percent to 106.64 yen, nearing a one-month low of 106.35 hit on Monday in the wake of the jobs report.

The euro rose to a one-month peak of $1.1415, with the latest uptick coming after the European Central Bank began buying corporate debt for its bond purchase program in a bid to boost the euro zone economy.

The New Zealand dollar was the region's outperformer, rallying roughly 1.5 percent to a one-year high of $0.7139 after the Reserve Bank of New Zealand held interest rates steady while retaining an easing bias.

The kiwi surged as not all in the market had expected the central bank to stand pat.

"We were surprised, we were calling for a rate cut. We still see one so the next opportunity is August. A key reason for that is persistent strength in the exchange rate," said Jane Turner, senior economist at ASB Bank.

"The Reserve Bank is relying on a lower New Zealand dollar to achieve their inflation target and based on where the exchange rate is now, they're not going to achieve that without cutting the cash rate further."

In commodities, U.S. crude oil extended overnight gains to reach an 11-month high of $51.67 a barrel. In addition to a weaker dollar, supply worries caused by a sabotage of oil facilities in major producer Nigeria has boosted oil. [O/R]

Brent crude rose as high as $52.86 a barrel, highest since October 2015.

Spot gold advanced to a three-week high of $1,266.01 an ounce, while aluminium climbed overnight to a one-month high of $1,612.50 a tonne. Copper also inched higher.

(Additional reporting by Charlotte Greenfield in Wellington, Christine Kim and Dahee Kim in Seoul; Editing by Shri Navaratnam and Kim Coghill)