Asian stocks rose and the US dollar weakened after economic data reinforced expectations the Federal Reserve will pump more money into the US economy to keep it from flagging. The Australian dollar and grain prices gained.
The MSCI Asia Pacific excluding Japan Index gained 0.7 per cent to 461.85 in Sydney, the highest level since June 2008. US equity futures increased and the Dollar Index dropped to a 10-month low. Corn futures in Chicago jumped to the strongest level in two years while silver rose to most in three decades.
The Fed will buy as much as $US65 billion in Treasuries a month as it attempts to stem job losses, Mansoor Mohi-uddin, head of global currency strategy at UBS AG, said. The yen reached a 15-year high against the dollar, and the won and ringgit gained after leaders of the world economy failed to narrow differences over currencies as they turned to the International Monetary Fund to calm frictions that are already sparking protectionism.
“Further quantitative easing will boost short-term liquidity, which should find its way into financial markets,” said Prasad Patkar, who helps manage about $US1.8 billion at Platypus Asset Management in Sydney. “It should also support broader economic activity in the longer term. At the same time, the rising supply of dollars in the system will increase demand for hard assets like commodities and precious metals as a store of value.”
Miners lead gains
About two stocks rose for every three that declined on the MSCI Asia Pacific excluding Japan Index, with Australian miners leading gains. Standard & Poor's 500 Index futures rose 0.2 per cent. The US benchmark gauge 0.7 per cent on Oct. 8 on speculation the Fed will take further action to support the economy after job losses hit 95,000 in September, exceeding the 5,000 median forecast in a Bloomberg News survey of economists.
Hyundai, South Korea's largest automaker, and Doosan Heavy Industries & Construction, the nation's biggest power-equipment maker, advanced at least 1.5 per cent, helping to drive the benchmark Kospi stock index 0.2 per cent higher. Goldman Sachs Group said the nation's equities have “more juice” and predicted the index may gain 30 per cent in the next 12 months.
BHP Billiton, the world's biggest mining company, gained 0.8 per cent as oil and metal prices rallied. Korea Zinc, which produces gold and silver, advanced 3.5 per cent in Seoul. China's Shanghai Composite Index climbed 1.6 per cent, extending its biggest gain in four months, on speculation yuan appreciation will accelerate. Jiangxi Copper jumped by the daily maximum 10 per cent, leading a rally among raw-material producers on higher commodity prices.
Aussie nears high
The Australian dollar rose toward the highest level since it began trading freely in 1983 after home-loan approvals climbed for a second straight month in August, strengthening the case for the central bank to increase its benchmark interest rate next month. The currency rose 0.2 per cent to 98.66 US cents after reaching as high as 99.18 cents on Oct. 7.
South Korea's won climbed to a five-month, reaching as strong as 1,110.75 per dollar. The Malaysian ringgit climbed 0.4 per cent, the most in a month, to 3.1005 per dollar.
Yuan forwards surged to the strongest level in more than two years on speculation the government will allow the currency to appreciate to meet the demands of trading partners. Twelve- month non-deliverable forwards jumped 0.6 per cent to 6.4540 per dollar.
Exchange rate race
Global finance chiefs at the International Monetary Fund annual meeting last week warned a race to weaker exchange rates in countries from China to Brazil risks hurting the world economy. The US Dollar Index traded on ICE futures in New York, which tracks the currency against those of six trading partners, dropped 0.4 per cent, a second day of losses.
“If China doesn't let the yuan rise at a time when the dollar is so weak in overseas market, there will be more pressure,” said Liu Dongliang, a Shenzhen-based analyst at China Merchants Bank, the country's sixth-largest lender by market value.
December-delivery corn rose by the 45 cent daily limit, or 8.5 per cent, to $US5.7325 a bushel on the Chicago Board of Trade, the highest level since September 2008.
The US Department of Agriculture on Oct. 8 cut its corn-crop estimate for the second time in as many months, predicting a 3.4 per cent decline from last year after flooding in June and hot, dry weather in August cut Midwest yields.
Silver for immediate delivery gained as much as 1.6 per cent to a 30-year high of $US23.6325 an ounce, while oil advanced for a second day, rising 0.5 per cent to $US83.07 a barrel in New York.