Asia Markets: Asia-Pacific stocks take a dive on weaker U.S. dollar

Stronger local currencies weighed on several stock markets in Asia on Thursday, keeping a damper on the start-of-year global stock rally.

This was most notable in New Zealand equities, with the benchmark NZX-50 NZ50GR, -1.37%   down 1.3% as the New Zealand dollar is at its strongest in three months versus the U.S. dollar. 

Some export-reliant companies which surged last year have been leading the pullback in New Zealand stocks, after the NZX started 2018 with three straight record closing highs. A2 Milk ATM, -4.44%  , which nearly quadrupled last year, was recently down 4% after Wednesday’s 2.9% drop.

In Japan, the Nikkei Stock Average NIK, -0.43%   fell 0.4% following after the yen gained nearly 1% against the dollar in European trading Wednesday. The currency has been strengthening since Tuesday, after the Bank of Japan trimmed its offers to buy government bonds maturing in 10 to 25 years, which prompted talk that the central bank may be quietly cutting back its asset purchases.

Thursday’s BOJ operations saw the bank making offers on shorter-term debt, and no offers for the bonds maturing in 10 to 25 years, a move suggesting the BOJ wasn’t tapering its purchases.

The dollar JPYUSD, -0.320240%   was recently at ¥111.50, compared with ¥112.35 soon after Tokyo stock trading ended Wednesday. The yen strengthened overnight to levels last seen in late November.

Asian stocks have been benefiting from recent commodity-price gains, but there is now “a bit of caution” about equities valuations, particularly in the wake of the yen’s gain, said Vishnu Varathan, a senior economist at Mizuho Bank.

Commodities have helped drive Australia’s stock benchmark to 10-year highs recently but the market was broadly weaker with the S&P/ASX 200 XJO, -0.55%   down 0.6% Thursday, extending Wednesday’s losses. Stocks weren’t helped by news of stronger-than-expected retail sales in November, though the Australian dollar jumped to session highs versus other currencies; it was recently up 0.5% at US$0.7875.

“Any residual expectations for the Reserve Bank of Australia to cut cash rates to encourage the economy have disappeared,” said Ric Spooner, chief market analyst at CMC Markets.

Oil futures were essentially flat in Asia after hitting fresh three-year highs Wednesday.

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