Asia markets struggle, dollar adds to gains despite N.Korea fears

The dollar has maintained its gains after rallying in New York on remarks from Federal Reserve boss Janet Yellen indicating interest rates will continue rising

Hong Kong (AFP) – Asian markets struggled to make headway  Wednesday but the dollar extended gains against its peers on expectations of further interest rate rises, while traders await the release of Donald Trump’s tax reform plan.

Shares were mixed as US-North Korea tensions continue to jangle nerves and keep investors from buying with any conviction.

Hong Kong added 0.4 percent in the afternoon, while Shanghai edged up 0.1 percent and Singapore gained 0.8 percent. But Seoul and Sydney each lost 0.1 percent, while Tokyo finished 0.3 percent lower. 

In early European trade London rose 0.4 percent, while Paris and Frankfurt were each 0.2 percent higher.

However, the yen — which surged Tuesday on safe-haven buying after Pyongyang accused Trump of declaring war on it and said it may shoot down US bombers — was being pegged back by the dollar in Tokyo.

The greenback returned to favour after Federal Reserve boss Janet Yellen indicated the bank would press on with its plan to raise borrowing costs, saying the US economy was strong enough to withstand it.

Analysts said her comments suggested she did not want to take too long to raise rates and end up having to introduce sharper increases down the line — which could risk a recession.

“In lay terms: ‘we just can’t wait till we see the whites of inflation’s eyes, that would be too late’,” said Greg McKenna, chief market strategist at AxiTrader.

The dollar rose well above 112 yen in New York Tuesday, having sat around the 111.50 yen level earlier in the day.

And in Asia the US unit  extended its gains towards 113 yen ahead of the long-awaited release of details on Trump’s tax plan, which he said would cut the burden “not just a little bit, but tremendously” for the middle class.

His market-friendly promise to cut taxes, ramp up infrastructure spending and slash red tape helped drive a global rally after his November election but a series of crises and setbacks in Congress have thrown his agenda off track.

The greenback was also up against the euro, which has taken a hit this week from traders worried about the difficulties German Chancellor Angela Merkel will have putting together a coalition in Europe’s biggest economy, and the implications for the eurozone.

Merkel won a fourth term Sunday but a hard-right opposition party entered parliament for the first time.

The single currency was around $1.1750, a one-month low, having been above the $1.20 mark on Friday.

– Key figures around 0720 GMT – 

Tokyo – Nikkei 225: DOWN 0.3 percent at 20,267.05 (close)

Hong Kong – Hang Seng: UP 0.4 percent at 27,611.28

Shanghai – Composite: UP 0.1 percent at 3,345.27 (close)

London – FTSE 100: UP 0.4 percent at 7,313.58

Euro/dollar: DOWN at $1.1750 from $1.1790 at 2040 GMT

Dollar/yen: UP at 112.72 yen from 112.25 yen 

Pound/dollar: DOWN at $1.3397 from $1.3456

Oil – West Texas Intermediate: UP 37 cents at $52.25 per barrel 

Oil – Brent North Sea: UP 36 cents at $58.80 per barrel

New York – DOW: DOWN 0.1 percent at 22,284.32 (close)