Nikkei Leads Asian Stocks Lower; Dollar Dips
Asian stocks fell to their lowest in a month on Wednesday following further losses on Wall Street, with the Nikkei suffering a late bout of selling as the dollar briefly slid below 97 yen for the first time in six weeks.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS shed 1.3 percent to its lowest since July 11, and Tokyo's Nikkei .N225 skidded 4 percent to its lowest close this month.
Major European bourses were seen tracking Asian markets lower with financial spread betters expecting opening losses of between 0.2 to 0.5 percent, while U.S. stock futures also pointed to another weak opening.
Exporters such as Toyota Corp (7203.T) were hit hard as investors worried that a stronger Japanese currency would erode their dollar earnings when repatriated.
Analysts also suspected selling related to the looming settlement of some equity options.
"Hedge funds, like commodity trading advisors, are shorting through some of the European brokerages," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
"They could also be selling index heavyweights to lower futures prices before the Nikkei 225 options settlement on Friday."
Other Asian markets also felt the heat, with Australia's S&P/ASX 200 index .AXJO ending 1.9 percent lower, while Hong Kong's Hang Seng .HSI dipped 0.9 percent.
The soggy performance on Asian bourses came after the U.S. S&P 500 index .SPX fell 0.6 percent, partly on uncertainty about when the Federal Reserve will begin to scale back its stimulus.
Investors keen for clarity on the timing of the Fed's plan were left sorely disappointed after comments from two top Federal Reserve officials shed no new light.
This uncertainty coupled with thin trading conditions and a lack of fresh impetus conspired to keep the greenback pinned down against a basket of major currencies.
The dollar index .DXY held near a one-week low as the greenback slid to 96.98 yen, a level last seen on June 25. The euro, while flat on the day at $1.3306, remained near a one-week high around $1.3323.
Joseph Capurso, currency strategist at Commonwealth Bank, said dollar/yen is still stuck in a consolidation phase since its huge rally from 78 yen to 103 fizzled in mid-May.
"It is perfectly normal for a currency pair to enter a consolidation phase after enjoying a large one-way move," he said. "When the consolidation phase ends, we expect USD/JPY to resume its uptrend."
Commodities were also struggling in dull summer trade, with gold extending losses into a third session as it fell to three-week low of $1,273.14 an ounce.
Copper slipped 0.6 percent to $6,963 a ton, erasing all the gains it made on Tuesday, while U.S. crude was little changed near $105 a barrel.
The next key focus for markets is the Bank of England's quarterly economic forecasts at 0930 GMT (5:30 a.m. EDT) and the first news conference by new Governor Mark Carney, at which he is expected to assure markets that it will keep interest rates at rock-bottom levels for an extended period.
On Thursday, the Bank of Japan will announce the outcome of its two-day policy review, and is widely expected to press on with its massive asset-buying program.
Recent data showed the world's third-biggest economy is starting to stir thanks to the BOJ's unprecedented quantitative easing push and government fiscal stimulus.
Also on Thursday China will post July trade data which analysts expect will show initial signs of stabilization in the economy.