Asian shares stagger on Friday as drowning crude prices and a tumble in China’s yuan to almost 4-1/2-year lows added to worries about receding global rise.
A supply glut in oil markets and cooling rise in China, the world’s bigger commodities consumer, have pressured many asset markets ahead of a widely required hike to U.S. interest rates by the Federal Reserve next week.
Bank of China (PBoC) set its guidance rate at the weakest level in more than four years on Friday, a sign Beijing is allow the currency to depreciate after it was included in the International Monetary Fund’s reserve basket.
The less fixings have also raised questions about how far the central bank intends to let it repent.
In the spot market, the yuan was changing hands at 6.4498, after taking out its August low hit after the unexpected devaluation of the Chinese currency and marking its lower level since the middle of 2011.
A U.S. rate hike would have a major effect on money flows out of emerging markets including Hong Kong and China, said Linus Yip, chief strategist at First Shanghai Securities.
If the yuan continues to repent, that’s negative to stocks as well, because it means investors are not confident about China’s economic restructuring.
MSCI’s broadest index of Asia-Pacific shares fell 0.7 per cent. The CSI300 index of the large listed companies in Shanghai and Shenzhen was down 0.7 percent, while the Shanghai Composite Index shed 0.9 per cent.
The dollar index, which tracks the U.S. unit against a basket of six major competitor, was up about 0.1 percent at 98.056. But it was on track for a weekly loss of about 0.3 percent after investors trimmed dollar-long positions ahead of next week’s U.S. Federal Reserve meeting at which the central bank is widely required to hike interest rates for the first time in nearly a decade.
Fed fund futures place an 85 percent opportunity of the Fed raising rates at its Dec. 15-16 meeting. A recent Reuters poll also showed that all but one of 18 brokerages that deal straight with the Fed hope a rate grow.
The euro edged down about 0.1 percent to $1.0932 but still up about 0.4 percent for the week after comments from the European Central Bank’s Ewald Nowotny raised doubts about the extent to which U.S. and European monetary policy will diverge.
The dollar added 0.5 percent against its Japanese counterpart to 122.07 but was quiet down around 0.8 percent for the week.
Despite this week’s softer dollar, U.S. crude oil futures continued to wallow close to 2009 less on oversupply fears, shedding 0.7 percent to $36.51 a barrel. Brent skidded 0.6 percent to $39.48.
South Africa’s rand, nonce plumbed record lows against the U.S. dollar after the abrupt dismissal of respected Finance Minister Nhlanhla Nene to make room for an ally of President Jacob Zuma.