Dollar rises on US data bounce, while Asian stocks fluctuate

The dollar strengthened through key resistance levels on Wednesday, driven by better-than-expected US retail data, although upbeat news was not enough to lift Asian stocks, dragged down by concerns about COVID-19 and higher costs. 

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5% from Tuesday’s three-week high, and was set for its biggest fall this month, posting seven days of gains. 

Japan’s Nikkei fell 0.3% on fears that a stronger dollar would mean higher costs of imported materials for manufacturers.

The dollar rose to a high of 114.97 yen in early Asian hours, its strongest since March 2017, while the euro fell to $1.1263, its lowest level since July 2020.

The greenback was helped by Tuesday’s data, which showed US retail sales rose faster than expected in October, potentially encouraging the US Federal Reserve to accelerate the tapering of its asset purchase program, as inflation remains too high. 

It also weighed on the US Treasury with the benchmark 10-year note yield rising to 1.649% in early Asia, hitting a three-week high.

FTSE futures slipped 0.37%, pointing to a weaker openness for British stocks, while pan-area Euro Stoxx 50 futures and US S&P 500 futures were flat. 

In a three-hour meeting on Tuesday, US President Joe Biden and Chinese leader Xi Jinping eased some of the heat in Sino-US tensions, though both sides maintained their positions on a range of issues.

Asian stocks rose marginally on Tuesday with a positive trend, but proved to be short-lived.

On Wednesday, South Korea’s KOSPI fell 1.2% when the country reported the second highest daily new coronavirus infections since the pandemic began.

Australian shares, weighed by the country’s largest bank, the Commonwealth Bank of Australia, slipped 8% after margins were hit by a low interest rate environment and mortgage competition.

Chinese blue chips were steady and the Hong Kong benchmark slipped 0.4%, as a short rally in developer and casino stocks ran out of steam.

US gasoline inventories fell more than expected last week after plunging oil prices put pressure on US officials to release oil from emergency reserves.

US crude fell 0.87% to $80.06 a barrel. Brent crude fell 0.5% to $81.69 a barrel.

Spot gold rose 0.25% to $1,854 an ounce, having climbed a five-month high of $1,876.9 a day earlier, on rising inflation concerns.

Rival inflation hedge bitcoin fell 0.8% to $59,500, down 5% from the day before.