Nikkei gains, Yuan slips, dollar steady ahead of Fed meet
Nikkei rises to fresh one-year high on back of strong showing on Wall Street.
Japan’s Nikkei share average rose to a one-year high on Monday morning helped by strong Wall Street gains and a weak yen, while investors bought defensive stocks that missed out in the recent rally.
By the midmorning break, the Nikkei rose 0.8 percent to 19,142.82 after hitting 19,280.93, the highest since mid-December last year.
Shares in the food sector and other defensive stocks gained as traders say investors are picking up stocks that have lagged in the monthlong rally since Donald Trump’s presidential election. The rally may continue through the year-end unless there is a negative surprise in the U.S. Federal Reserve’s decision this week, they added.
“Although people are worried that the market is being overbought in a short period of time, they started to think that the Nikkei may continue rising and end this year at the highest level this year,” said Hikaru Sato, a senior technical analyst at Daiwa Securities.
The Nikkei is trading about 6 percent above its 25-day moving average of 18,051. A level above 5 percent is seen as overbought.
China’s yuan slipped ahead of the Federal Reserve gathering that is expected to deliver an interest rate hike for the first time in 2016 at a two-day meeting that begins on Tuesday.
The People’s Bank of China set the midpoint rate at 6.9086 per dollar before opening, weaker than the previous fix 6.8972.
The spot market opened at 6.9092 per dollar and was changing hands at 6.9147 at midday, 91 pips weaker than the previous late session close and 0.09 percent softer than the midpoint.
The dollar edged up 0.1 percent to 115.43 yen after earlier touching 115.55 yen, its loftiest peak since February, boosting the overall mood.
Back in Japanese stocks, food companies, which were lagging behind the rises in exporters and financials, were higher. Kikkoman Corp jumped 7.1 percent and Ajinomoto Co added 5.0 percent.
Utility stocks also gained ground, with Tokyo Gas rising 4.7 percent and Osaka Gas advancing 2.3 percent. Railroad stocks were stronger, with East Japan Railway gaining 1.7 percent and West Japan Railway surging 3.4 percent.
TDK Corp jumped 3.7 percent after sources said that the company is in talks to buy U.S. chipmaker InvenSense Inc. that produces motion sensors for Apple Inc and Samsung Electronics Co.
The broader Topix added 0.2 percent to one,528.43 and the JPX-Nikkei Index 400 advanced 0.3 percent to 13,691.41.
Elsewhere, the South Korean won slumped to a one-week low in early trade on Monday, being quoted at one,170.3 against the dollar as of 0219 GMT, down 0.4 percent from its previous close of one,165.9.
“The dollar’s path is quite clear. It lost some ground toward the end of the weekend but now it’s jumped back up and if the yuan softens midday we’ll see the won falling further,” said a foreign bank dealer in Seoul.
South Korean shares opened at their highest level since Oct. 25 as investors felt some uncertainty in the market was erased after South Korean lawmakers voted overwhelmingly on Friday to impeach President Park Geun-hye over an influence-peddling scandal.
However, the modest gains were quickly erased as foreigners took profits ahead of the Fed meeting, with the Korea Composite Stock Price Index (KOSPI) trading down 0.01 percent at 2,024.40 points.
On Sunday, South Korea’s regulator said authorities were ready to punish those who attempt to disrupt markets amid volatility sparked by the political issue at home on top of uncertainties abroad.
Construction shares rallied more than 3 percent after oil prices shot up early on Monday on hopes higher revenues in the Middle East from oil would benefit South Korean builders there.
Electricity and electronics stocks were down 1.4 percent.
December futures on three-year Treasury bonds were trading down 0.05 points at 109.27.