Dollar Stays Lower as Irma Looms; Stocks Mark Time: Markets Wrap

(Bloomberg) -- The dollar held losses as investors braced for damage that Hurricane Irma may inflict on Florida, and the euro was near a 20-month high after the European Central Bank stopped short of attempting to jawbone it lower. Stocks in Asia were flat at the open.

The yen extended gains after hitting its strongest since November. Asian equities in Tokyo, Seoul and Sydney opened mixed, with benchmarks fluctuating. The euro climbed overnight after ECB President Mario Draghi cautioned on the common currency’s strength though didn’t expand on any action to address it. Ten-year Treasury yields fell toward 2 percent. Gold headed for a third week of gains ahead of a potential North Korean missile launch.

Draghi said he’s watching the euro’s gains as policy makers edge toward settling the future of their bond-buying program. The euro’s surge -- more than 14 percent against the dollar this year -- was reflected in a downgrade to the ECB’s inflation outlook, though Draghi said economic growth remains solid.

Federal Reserve Bank of New York President William Dudley was the latest U.S. central banker to lay out his views ahead of a policy-setting meeting later this month as expectations for an interest-rate increase have been scaled back. Dudley reiterated the need to continue raising rates while conceding that the Fed may have to rethink its inflation model.

Meanwhile, the threat from North Korea lingers. U.S. President Donald Trump said it’s not “inevitable” that the U.S. will wind up in a war with North Korea over its continued development of nuclear weapons, though military action remains an option. Pyongyang may
test a missile this weekend to coincide with its “founding day” on Sept. 9.

Terminal subscribers can read more on our Markets Live blog.

The key events this week:

• Japan revised down its second-quarter economic growth to an annualized 2.5 percent from 4 percent, weaker than expectations for a revision to 2.9 percent.
• Australia’s home-loan approvals probably increased 1 percent in July from June.
• China’s trade surplus is forecast to widen to $48.5 billion in August from July’s $46.7 billion.
• China’s forex reserves climbed $11 billion to $3.09 trillion in August, a seventh gain in a row as the yuan rose, the PBOC said Thursday.
• Also due in Asia are Taiwan exports.
• Malaysia’s central bank held its main rate at 3 percent Thursday as expected.
• U.S. jobless claims surged last week by the most since November 2012 because of benefit claims from Hurricane Harvey. They increased to 298,000 versus an estimate of 245,000. 
• The White House is considering at least six candidates to succeed Janet Yellen as the next Fed chair, people familiar with the matter said.

And here are the main moves in markets:

Stocks

• The Topix index fell 0.2 percent as of 9:38 a.m. in Tokyo, while they South Korea’s Kospi index was down 0.2 percent and Australia’s main gauge was 0.1 percent lower.
• Hang Seng Index futures were up 0.4 percent.
• Contracts on the S&P 500 Index lost 0.2 percent after the underlying benchmark closed little changed on Thursday. The Nasdaq Composite Index and Dow Jones Industrial Average also barely budged.

Currencies

• The Japanese yen added 0.2 percent to 108.24 per dollar after increasing 0.7 percent.
• The euro was slightly higher at $1.2031 after jumping to its strongest since 2015.
• The Australian dollar also climbed to 80.55 U.S. cents following a 0.6 percent increase.
• The Bloomberg Dollar Spot Index fell for a seventh day and reached the lowest in more than than two years.

Bonds

• Yields on 10-year Treasuries were down 1 basis point to 2.03 percent, after falling more than six basis points Thursday.
• The Australian 10-year bond yield slumped about eight basis points to 2.55 percent.

Commodities

• Gold was little changed at $1,350 an ounce, and touched its highest in a year. It advanced 1.1 percent on Thursday.
• West Texas Intermediate crude was steady at $49.12 a barrel.

--With assistance from Andrew Dunn

To contact the reporter on this story: Andreea Papuc in Sydney at apapuc1@bloomberg.net.

To contact the editor responsible for this story: Christopher Anstey at canstey@bloomberg.net.