Wellington – The US dollar headed for its worst week since 2009 as traders strengthened bets that the Federal Reserve will hold interest rates unchanged.
Demand for government debt sent Japan’s 10-year bond yields to a record low.
Asia’s regional stock gauge resumed its decline, led by Japanese shares as the yen headed for its strongest weekly advance in more than six years. Standard & Poor’s 500 Index futures were little changed after US stocks rose on Thursday.
Japan’s 10-year yields extended a slide toward zero, fueled by the central bank’s move to negative interest rates. The Bloomberg DollarSpot Index fell 2.4% since January 29 as economists forecast US government data on Friday will show jobs growth in January was the weakest since September.
Patchy US data ignited the dollar’s retreat this week, while concern the American economy is vulnerable to global headwinds fueled the declines.
The fixed-income market is all but pricing in no Fed rate hikes this year, as central banks from Asia to Europe have mixed success trying to quell the turmoil that’s roiled markets in 2016. While a weaker dollar makes commodities cheaper and more appealing in other currencies, oil is heading for its first weekly loss since mid- January as US inventories rise to a record.
“Expectations are growing by the day that the Fed will not hike again this year given the weaker growth picture and tightening financial conditions,” Jason Wong, a currency strategist in Wellington at Bank of New Zealand, said in an email to clients. “The key release is US employment data overnight, which is expected to show some payback in employment growth in January.”
The MSCI Asia Pacific Index lost 0.3% as of 08:09, bringing its drop in the week to 0.5%.
The Topix index in Japan fell to 1.4% with the local currency poised for its best weekly performance since July 2009. The Nikkei 225 Stock Average is on track for its fourth weekly retreat out of five, sliding 4 percent as losses among exporters wiped out gains incurred after the Bank of Japan unexpectedly bolstered economic stimulus on January 29.
“The Bank of Japan has done what they should, but what they could do had its limits,” Juichi Wako, a senior strategist at Nomura Holdings Inc. in Tokyo, said by phone. “Until now the view on the US economy was that it’s recovering, but the pace isn’t as fast as hoped. Now there’s some concern in the market that it may actually be contracting.”
Japan’s biggest pension fund, the world’s largest, has been denied permission to bypass asset managers when doing business in the local stock market, according to Kyodo News. The $1.2trn Government Pension Investment Fund had been seeking clearance to act directly rather than hiring managers in order to reduce operating costs and boost the size of its investments.
Australian stocks fell, with the S&P/ASX 200 Index in Sydney down 0.6 this week.
S&P 500 futures fell 0.2% on Friday, after the benchmark closed up 0.2% last session. Nasdaq 100 Index futures slipped 0.3% as LinkedIn plummeted in extended New York trading after forecasting below-estimate revenue.
Hong Kong’s Hang Seng Index added 0.4%, while the Hang Seng China Enterprises Index gained 1%. The Shanghai Composite Index was down 0.4%.
Trading volumes could be muted in Asia as investors prepare for next week’s Lunar New Year break. Mainland Chinese markets are closed all week with Taiwan’s, while Hong Kong is shut for the first three days, resuming Thursday.
The US dollar has dropped 3.3% to $1.1197 per euro since January 29, poised for its steepest slide since 2011.
Australia’s dollar fell 0.2% after government data showed weaker retail sales than forecast and the nation’s central bank reiterated it has scope to cut interest rates.
The rally in Japanese government bonds set off by the BOJ sent the yield on 10-year benchmark notes to an unprecedented 0.025% in Tokyo on Friday. Nomura Asset Management stopped accepting investments into some money-market funds as the $14.1bn dollar industry grapples with the negative interest rates introduced by policy makers.
Oil headed for its first weekly drop since mid-January as a persistent global glut proves a hurdle for any sustained price rally. Futures were little changed in New York at $31.71 a barrel and are down 5.7% for the week. US supplies rose above 500 million barrels through January 29, the highest level since 1930 in monthly government data compiled by the Energy Information Administration.
Copper declined 0.6% to $4 657.50 a metric ton, trimming its weekly decline to 2.1%.
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