Dollar, equities stutter in Asia after Trump rally

The dollar dipped on Thursday in Asia as investors brushed off another record Wall Street close and upbeat US data while the rally in stock markets stuttered.

Another positive assessment of the US economy and reassurance over tax reform from President Donald Trump was not enough to spur further buying in Asia after the past week’s rally.

New York’s three main indexes built on their recent surge, racking up a fifth successive day of record closes, after figures showed US inflation hit a four-year high in January, fuelling bets on an interest rate hike soon.

Trump said Wednesday he would release specifics on his new tax plan in the “not-too-distant future”, adding it will be “good and simpler”.

His remarks came less than a week after he promised “phenomenal” reforms to the tax system, spurring a surge in global markets and the dollar.

“The strong numbers highlight that the US economy is in fairly healthy shape,” Greg McKenna, chief market strategist at CFD and FX provider AxiTrader, said in a note.

“The key is the data and president Trump’s recommitment to the release of the tax plan everyone is waiting for,” McKenna said.

Federal Reserve chief Janet Yellen also reiterated her view to Congress that the world’s top economy was on a strong growth track, a day after indicating borrowing costs could increase any time soon — leading to speculation of a move as soon as March.

However, the greenback was unable to push on with its gains and was down against its major peers as well as higher-yielding currencies in the Asia-Pacific such as the Australian dollar and South Korea’s won.

In equity trade Tokyo ended 0.5 percent lower as exporters were hit by the stronger yen while Seoul slipped 0.1 percent, Wellington gave up 1.1 percent and Taipei slipped 0.3 percent. Mumbai and Jakarta were also down.

But Hong Kong and Shanghai each ended 0.5 percent higher, reversing morning losses.

Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank, told Bloomberg News warned of a possible correction after the past week’s performance.

“Can equities sustain this rally from here?” Sera asked. “If the decline today in Japanese shares spill over to European shares and then to New York, things could get serious but we’ll have to see.”

In early European trade London dipped 0.2 percent, Frankfurt shed 0.1 percent and Paris was flat.

– Key figures around 0800 GMT –
Tokyo – Nikkei 225: DOWN 0.5 percent at 19,347.53 (close)

Hong Kong – Hang Seng: UP 0.5 percent at 24,107.70 (close)

Shanghai – Composite: UP 0.5 percent at 3,229.62 (close)

London – FTSE 100: DOWN 0.2 percent at 7,288.84

Euro/dollar: UP at $1.0610 from $1.0602

Pound/dollar: UP at $1.2477 from $1.2459

Dollar/yen: DOWN at 113.94 yen from 114.18 yen

Oil – West Texas Intermediate: DOWN 11 cents at $53.00 per barrel

Oil – Brent North Sea: DOWN seven cents at $55.68

New York – Dow: UP 0.5 percent at 20,611.86 (close)