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Wellington - The South Korean won fell along with Asian equities and the yen gained after China weakened the yuan’s daily fixing by the most in more than a month.
Malaysia’s ringgit slumped to a two-week low as a deal between Saudi Arabia and Russia to freeze oil production failed to assuage anxiety over this year’s crude selloff.
The MSCI Asia-Pacific Index dropped for the first time in three days, while the Indonesian rupiah and the won depreciated more than 0.5% amid speculation their central banks will bolster stimulus to help boost economic growth.
The Australian and New Zealand dollars weakened after China fixed the yuan lower, while US index futuresfell. American crude was below $30 a barrel after the world’s two biggest oil producers agreed to hold output near record-high levels, dashing speculation that they would cut it.
“There is an increasing bias towards policy easing in the region, and we’re looking for rate cuts in China, India, Indonesia and Korea,” said Mitul Kotecha, head of Asian foreign- exchange and interest-rate strategy at Barclays in Singapore. “That will undermine currencies in the region. We’ve seen a little bit of intensification of risk aversion.”
Central bank attempts to steady global markets this year amid unprecedented volatility have had mixed success, with Japanese shares initially falling after the Bank of Japan announced a move into negative interest rates. Japan’s overnight call rate fell below zero for the first time in a decade, traders said.
Oil’s volatile journey in 2016 has fueled that uncertainty, amid concern over the impact on inflation. Minutes of the Federal Reserve’s most recent meeting, where officials indicated they were monitoring the turmoil in markets, are due on Wednesday. Chair Janet Yellen has subsequently indicated that the global ructions could delay further tightening of US monetary policy.
Stocks
The Asia Pacific gauge dropped 0.9% as of 08:33, with the Topix tumbling to a 1.1% loss after earlier jumping more than 1%.
Chinese stocks fluctuated after the benchmark index posted its biggest rally in three months, with commodity producers declining.
“Stay cautious,” Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion, said by phone.
“Don’t be afraid to reduce risk because we expect things to be volatile from here - it’s a relatively defensive message. There are a lot of economic issues that need to be worked through. We’ve been incrementally paring back” risk positions, including equities, he said.
A 4.2% slump in Australia’s energy stocks led Australia’s S&P/ASX 200 Index as it declined 0.6%. Woodside Petroleum, the nation’s second-largest oil and natural gas producer, tumbled 6.9% after reporting a 99% collapse in full-year profit amid the rout in energy prices. The S&P/NZX 50 Index in New Zealand advanced 0.1% in a third straight day of gains.
Futures on the Standard & Poor’s 500 Index retreated 0.2% after the benchmark capped its best two-day gain since August on Tuesday, rising 1.7% as markets returned after a holiday on Monday.
Currencies
The won fell to a more than five-year low as bets increased the Bank of Korea will cut its policy rate after one of seven board members called for a reduction when the central bank left its benchmark rate at a record-low 1.5% on Tuesday.
The currency dropped 0.9% to 1 227.30 a dollar after touching 1 228.40, the weakest level since July 2010. It’s retreated 4.5% this year, the most among Asia’s emerging markets.
Malaysia’s ringgit dropped 1.3% to 4.2078 per dollar, and touched a two-week low, as crude prices near the lowest since 2003 threaten the oil exporters’ finances. Indonesia’s rupiah slumped 0.8% as 17 of 28 economists surveyed by Bloomberg forecast the nation’s central bank will lower the benchmark interest rate when they announce policy on Thursday.
The yuan headed for the biggest two-day decline in more than a month as the central bank’s fixing for the currency tracked an overnight advance in the dollar and official media voiced concern that capital outflows will increase.
Australia’s dollar was poised for its first two-day drop since mid-January, declining 0.3% to 70.89 US cents. The New Zealand currency fell 0.1%.
Commodities
West Texas Intermediate crude fell 0.3% to $28.94 a barrel, after sliding 1.4% last session on news of the Saudi-Russia pact.
The agreement, which doesn’t include Iran, is the first significant cooperation between OPEC and non-OPEC producers in 15 years, and Saudi Arabia said it’s open to further action. The two countries agreed to a deal, which includes Qatar and Venezuela, that fixes output at January levels.
Given no cuts in production were agreed to by Russia and Saudi Arabia, “the market’s response to the agreement suggested they are underwhelmed,” Sharon Zollner, a senior economist in Auckland at ANZ Bank New Zealand, said in a note to clients. “Oil prices at current levels are profitable for very few and so we find ourselves in that classic commodity equation: the best cure for low prices is low prices.”
Gold climbed 0.5% $1 206.42 an ounce following a three-day drop.
Nickel dropped 1.3% to $8 235 a metric ton on the London Metal Exchange to lead base metals lower. Copper declined 0.3% and tin retreated 1.2%.
Bonds
Treasury benchmark 10-year notes halted a two-day decline before the Fed issues the minutes of its last policy meeting, when officials refrained from raising interest rates. The yield on the debt fell three basis points to 1.74 percent.
Yields on similar-dated Australian notes declined four basis points to 2.48 percent.
