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Sunday, September 24, 2023

Asian stocks brace for China trade data, dollar up

By Saikat Chatterjee

HONG KONG (Reuters) – Asian stocks edged higher on Tuesday after a six-day losing streak and the dollar firmed against the safe-haven Japanese yen, but gains were muted ahead of Chinese data which could offer more clues on the health of its economy.

Chinese trade data at 0200 GMT is likely to show a further contraction in both imports and exports in August and point to a continued economic slowdown, but are not expected to offer any signs of a hard landing which some global investors have begun to fear.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2 percent in early trade but remained near a three-year low hit two weeks ago.

U.S. stock futures rose 0.9 percent after a long holiday weekend, catching up to gains in Europe on Monday.

“With the U.S. markets closed on Monday, risks emanating from China will be the main currency driver. Shanghai stocks will be in focus and especially how China’s trade data affects sentiment there,” said Junichi Ishikawa, market analyst at IG Securities in Tokyo.

Japan’s Nikkei slipped 0.3 percent, extending its rebound from a seven-month low hit early on Monday while Australia rose 1 percent in early trades.

Chinese stocks opened slightly lower before climbing back into positive territory, while Hong Kong edged higher.

Highlighting the growing concerns about economic stability and capital outflows from China, its foreign exchange reserves fell by a record $ 94 billion in August as the central bank struggled to steady the yuan after its surprise devaluation.

Adjusted for currency revaluation effects, Nomura strategists reckon the decline in reserves was more likely around $ 129 billion. That comes after a 2.6 percent monthly drop in the value of the yuan against the U.S. dollar, and raised doubts about how long China can continue supporting the yuan at current levels if the economy continues to cool.

“The fall was larger than market expectations… Coupled with other data, it shows that the Chinese authorities have been intervening to support the yuan as capital outflows continue,” said Shin Kadota, chief FX strategist at Barclays in Tokyo.

In contrast to Beijing’s mountain of reserves backing the yuan, other emerging market currencies weren’t so lucky.

Malaysia’s ringgit plumbed fresh 17-year lows while the Indonesian rupiah slipped towards 14,500 — levels not seen since the Asian financial crisis, both under pressure because of relatively limited foreign currency reserves.

With U.S. financial markets shut for holiday on Monday, the dollar moved little against major currencies.

The dollar index stood at 96.159, little changed from late last week.

Against the yen, the dollar ticked up slightly to 119.37 yen, still half-way in recovering its losses on Friday. The euro stood little changed at $ 1.11670.

Oil prices fell more than 3 percent on Monday, as the fall in Chinese share prices and record North Sea crude production added to global supply concerns.

Brent crude futures rose 0.7 percent to $ 47.94 after a 3.7 percent fall on Monday. They still traded below the 50 percent retracement of their rally late August to $ 54.32 from 1/2-year low of $ 42.23.

(Additional reporting by Hideyuki Sano in TOKYO; Editing by Kim Coghill)

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