UPDATE: Yen strength weighs on Nikkei, other Asian stocks slip

02/14/17 05:57 AM EST

By Willa Plank

Traders tread lightly, waiting for word of Fed's next rate hike

The strengthening of the yen against the dollar on Tuesday pressured Japan stocks after recent gains, adding to broader uncertainty about the direction of equities following the latest uptick in riskier investments

As worries cooled last week over geopolitics and where U.S. policy may be headed, the yen, gold and sovereign-debt prices logged declines, while equities and the dollar perked up again. But ahead of U.S. Federal Reserve Chairwoman Janet Yellen's upcoming congressional testimony, some caution has returned.

The yen moved from around Yen113.75 versus the dollar to below Yen113.50 in an hour, after which the Japan stock market's lunch break resulted in the Nikkei going from down 0.2% to down 0.8%. The Nikkei closed down 1.1%.

Read:Dollar softens up as investors wait for Yellen testimony (http://www.marketwatch.com/story/dollar-softens-up-as-investors-wait-for-yellen-testimony-2017-02-14)

Singapore's Strait Times Index closed down 1.4% after three days of gains, as concerns about bank earnings cut into sentiment. Oversea-Chinese (O39.SG) dropped 3% following weak fourth-quarter results. DBS (D05.SG) and United Overseas Bank (U11.SG) which report later this week, fell 2.8% and 1.5%, respectively.

Read:Toshiba to book $6.3 billion U.S. nuclear write-down, delays earnings (http://www.marketwatch.com/story/toshiba-to-book-63-bln-us-nuclear-write-down-2017-02-14)

Tuesday's pause in Asian stocks follows some easing of concerns. Recent actions by U.S. President Donald Trump, including his phone call with Chinese President Xi Jinping last week and meeting with Japanese Prime Minister Shinzo Abe over the weekend, soothed worries he would provoke a trade or currency war early in his administration.

Trump's confirmation of the "One China" policy contributed to the recent positive momentum, said Christoffer Moltke-Leth, director of global sales trading at Saxo Capital Markets. "This is very positive for U.S.-China relations going forward."

There were also some positive economic data in Asia on Tuesday.

China's consumer price inflation climbed to a 2 1/2 -year high (http://www.marketwatch.com/story/chinas-prices-rise-at-fastest-pace-in-years-2017-02-13) on stronger food prices ahead of the Lunar New Year, official data showed. The consumer price index increased 2.5% in January from a year earlier, compared with a 2.1% gain in December. China's producer prices rose for the fifth consecutive month, with January's year-over-year change accelerating to 6.9% from 5.5%.

Australia's NAB Monthly Business Survey, a key indicator of corporate sentiment there, was also strong. Data exceeded all expectations, TD Securities said. Business conditions hit their strongest level in a decade (http://www.marketwatch.com/story/australian-business-conditions-near-decade-highs-2017-02-14).

The Aussie dollar gained after the report, rising from below US$0.7650 to US$0.7670.

-Willa Plank ; 415-439-6400; AskNewswires@dowjones.com

 

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02-14-17 0557ET

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