Mar­kets up but Trump fears re­main

The Myanmar Times - - International Business -

MOST Asian emerg­ing mar­kets rose yes­ter­day af­ter the pre­vi­ous day’s heavy losses while the dol­lar dipped against most peers but traders re­mained on edge over Don­ald Trump’s plans for global trade agree­ments.

While shares in de­vel­oped economies have ral­lied and safe-haven sov­er­eign debt prices have fallen, many trad­ing floors have taken a hit over wor­ries Mr Trump will throw up tar­iffs to the world’s big­gest econ­omy.

His plans for huge spend­ing and tax cuts at home have also fanned ex­pec­ta­tions the Fed­eral Re­serve will hike in­ter­est rates more sharply than ini­tially planned, send­ing the dol­lar soar­ing and fu­elling an ex­o­dus from emerg­ing mar­kets.

How­ever, af­ter a two-day re­treat on most re­gional bourses, there was a ten­ta­tive re­cov­ery with Manila up 0.3 per­cent, Jakarta 0.5pc higher and Bangkok added 0.2pc.

There were also gains of 0.7pc in Sin­ga­pore and a 0.5pc rise in Welling­ton while Hong Kong gained 0.5pc.

How­ever, Tokyo was marginally lower, hav­ing surged more than 8pc to a nine-month high since Novem­ber 10 on the back of a rally in the dol­lar against the yen.

Shanghai was off 0.1pc, while Syd­ney and Seoul each shed 0.4pc.

“Risks are el­e­vated, and we are ex­pect­ing fur­ther in­creases in volatil­ity as mar­kets at­tempt to sec­ond-guess the poli­cies that might even­tu­ally come out from the US,” Michael McCarthy, chief mar­ket strate­gist at CMC Mar­kets in Syd­ney, said.

The dol­lar dipped back from a five­month high of 108.54 yen, but traders sug­gested it could test the 110 yen mark as soon as this week, with eyes on Fed chief Janet Yellen’s con­gres­sional tes­ti­mony later this week.

The cen­tral bank is widely ex­pected to hike bor­row­ing costs next month but her re­marks to­mor­row will be pored over for clues about its plans for next year.

“By all ac­counts, there ap­pears no stop­ping the US dol­lar’s re­cent as­cent based on the cur­rent in­ter­est rate tra­jec­tory,” Stephen Innes, se­nior trader at OANDA, said in a note.

And Takuya Kanda, a se­nior re­searcher at Re­search In­sti­tute said, “The dol­lar is cur­rently ral­ly­ing on ex­pec­ta­tions only. But the poli­cies Trump has called for are all dol­lar-pos­i­tive. Af­ter paus­ing around 107 to 108, the dol­lar will re­sume its up­trend to­ward 110 yen by year-end.”

The dol­lar sank against high­eryield­ing cur­ren­cies, with the South Korean won, Aus­tralian dol­lar, Thai baht and New Zealand dol­lar all well up. The euro also rose af­ter hit­ting an 11-month low of $1.0709.

And Mex­ico’s peso was 2pc higher, hav­ing hit record lows on wor­ries about Mr Trump’s warn­ing he will tear up a trade deal with the coun­try.

Bets on a sharper rise in US rates have sent bond yields soar­ing in the US and Aus­tralia as traders shift out of them be­cause sov­er­eign debt usu­ally of­fers lower rates of in­ter­est.

Prices and yields move in­versely from each other. Aus­tralian debt yields are at their high­est since April, ac­cord­ing to Bloomberg News.

Oil prices surged on re­newed hopes that OPEC can reach a deal to cap out­put be­fore it holds its twiceyearly meet­ing this month.

Oil has come un­der pres­sure on wor­ries the OPEC deal would fall apart and on a stronger dol­lar, which makes it more ex­pen­sive for hold­ers of other cur­ren­cies.

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