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Dollar Slips Before Yellen as Bonds Gain; Asian Shares Fluctuate

Dollar Slips Before Yellen as Bonds Gain; Asian Shares Fluctuate

Dollar Slips Before Yellen as Bonds Gain; Asian Shares Fluctuate
Stock Figures Displayed at the Philippines Stock Exchange (Photographer: Taylor Weidman/Bloomberg)

(Bloomberg) -- The dollar weakened versus most peers, Treasuries edged higher and Asian stocks fluctuated ahead of American inflation data and testimony from Federal Reserve Chair Janet Yellen that will help shape U.S. interest-rate expectations.

The euro strengthened for the first time in nine days as Bloomberg’s dollar index retreated from a nine-month high. Australian and New Zealand government bonds extended the last session’s recovery from a post-U.S. election debt rout as benchmark Treasuries advanced. Japan’s Topix index held close to the brink of a bull market, while Chinese shares declined for a third day. Crude oil fell following an increase in American stockpiles and as OPEC talks to agree output cuts showed signs of strain.

Dollar Slips Before Yellen as Bonds Gain; Asian Shares Fluctuate

Yellen will be addressing Congress for the first time since Donald Trump’s victory in the Nov. 8 presidential election, an unexpected win that spurred speculation his plans for fiscal stimulus will quicken the pace of Fed interest-rate hikes. A December rate increase has become a foregone conclusion in the futures market and prospects for further tightening triggered a global bonds rout and boosted the dollar since the start of last week.

“A December rate hike is almost guaranteed,” James Woods, global investment analyst at Rivkin Securities in Sydney, said in an e-mail to clients. “What will be important will be any revisions to future hike projections.”

Currencies

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, slipped 0.1 percent as of 11:10 a.m. Tokyo time. The yen weakened 0.1 percent to 109.14 per dollar, though is still down more than 3 percent since Trump’s victory. The euro gained 0.1 percent, snapping an eight-day losing streak.

Malaysia’s ringgit fell for a seventh day, its longest stretch of losses in more than a year. Bank Negara Malaysia said Wednesday it will continue to restrict speculative activity in the currency market.

“I’m just seeing this as overall dollar strength,” said Wu Mingze, a foreign-exchange trader in Singapore at INTL FCStone Inc., a Nasdaq-listed global payments-service provider. “Unfortunately speculators will treat Bank Negara’s statements as a sign of weakness if they do not actually do something.”

Bonds

The yield on U.S. Treasuries due in a decade fell two basis points to 2.20 percent, having surged as much as 45 basis points in the wake of Trump’s election win to reach this year’s high of 2.30 percent on Monday. Traders assign about a 94 percent probability, the highest level of 2016, to the Fed boosting rates at its final meeting for the year on Dec. 13-14, futures contracts indicate.

“The market is firming in its expectations that the Fed is going to go,” said Aaron Kohli, a fixed-income strategist in New York at BMO Capital Markets Corp., one of 23 primary dealers that trade with the central bank. “We sold off very sharply in the last week and a half, and there’s some money that’s being put to work.”

The government will sell Treasury Inflation Protected Securities on Thursday and demand may be robust with BlackRock Inc., Fidelity Investments and Pacific Investment Management Co. -- which oversee almost $9 trillion combined -- all having recommended the securities since the U.S. election amid concern that consumer-price gains will accelerate.

New Zealand’s 10-year bonds rose for a third day, pushing their yield down by nine basis points to 3.01 percent. Similar-maturity notes in Australia gained for a second day.

Japan’s 10-year yield held steady at 0.015 percent. The Bank of Japan announced its first operations to purchase bonds at a fixed rate, a tool it introduced when deciding in September it would seek to control the yield curve. The purchases are targeting notes with maturities of up to five years.

Stocks

About four shares advanced on the MSCI Asia Pacific Index for every three that declined. Japan’s Topix index held close to a nine-month high and the Shanghai Composite Index fell 0.3 percent.

Futures on the S&P 500 Index rose 0.2 percent after the underlying gauge fell 0.2 percent in the last session and the Dow Jones Industrial Average retreated from a record high. Wal-Mart Stores Inc. is among companies reporting earnings on Thursday.

Commodities

Crude oil fell 0.1 percent to $45.52 a barrel in New York after U.S. inventories rose for a third week. Prices were also depressed as Iran and Iraq, the two producers that pose the biggest obstacle to a proposed output cut by the Organization of Petroleum Exporting Countries, said they’re skipping talks this week in Qatar. Saudi Arabia, Iraq and Iran remain at odds over how to share output cuts, said an OPEC delegate, who asked not to be identified because the information isn’t public.

--With assistance from Emma O'Brien and Liau Y-Sing To contact the reporter on this story: James Regan in Hong Kong at jregan19@bloomberg.net. To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net, Andreea Papuc