Japan stocks lead Asia lower, kiwi flies as central bank stands pat

Asian stocks turned lower on Thursday, led by sliding Japanese equities, while a weaker dollar buoyed commodities such as gold and crude oil.

Spreadbetters expected a lower open for Britain’s FTSE, Germany’s DAX and France’s CAC with a stronger euro seen weighing on European shares.

The New Zealand dollar soared to a one-year high after the nation’s central bank kept interest rates steady as expected, even as some in the market had wagered on a cut.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2 percent after rising by as much as 0.3 percent earlier to a six-week high.

The Nikkei pulled back 1.3 percent, hurt by a stronger yen. Financial markets in Hong Kong and China were closed for holidays.

South Korea’s Kospi lost 0.3 percent. The index briefly rose to a 2016 high after the Bank of Korea unexpectedly cut its policy rate to a record low 1.25 percent amid weak inflation and stagnant exports. The BOK may also be looking to cushion the economy as the government drives a major overhaul of the struggling shipping and shipbuilding industries that could see large job losses.

“Many expected the U.S. Federal Reserve to hike rates in June or July but after the May (U.S.) jobs data a June hike now seems impossible. The BOK probably thought taking action before the Fed’s rate hike would be safer,” said Lee Sur-bee, fixed income analyst at Samsung Securities.

On Wall Street, the Dow gained 0.4 percent overnight, rising above 18,000 for the first time since April as a weaker dollar lifted some commodity-related shares. [.N]

The greenback slipped 0.4 percent to 106.58 yen, nearing a one-month low of 106.35 hit on Monday in the wake of the jobs report.

The euro rose to a one-month peak of $1.1416, with the latest uptick coming after the European Central Bank began buying corporate debt for its bond purchase program in a bid to boost the euro zone economy.

The New Zealand dollar was the region’s outperformer, rallying about 1.7 percent to a one-year high of $0.7148 after the Reserve Bank of New Zealand held interest rates steady while retaining an easing bias.

The kiwi surged as not all in the market had expected the central bank to stand pat.

“We were surprised, we were calling for a rate cut. We still see one so the next opportunity is August. A key reason for that is persistent strength in the exchange rate,” said Jane Turner, senior economist at ASB Bank.

“The Reserve Bank is relying on a lower New Zealand dollar to achieve their inflation target and based on where the exchange rate is now, they’re not going to achieve that without cutting the cash rate further.”

In commodities, U.S. crude oil extended overnight gains to reach an 11-month high of $51.67 a barrel. In addition to a weaker dollar, supply worries caused by a sabotage of oil facilities in major producer Nigeria has boosted oil. [O/R]

Brent crude rose as high as $52.86 a barrel, highest since October 2015.

Spot gold advanced to a three-week high of $1,266.01 an ounce, while aluminium climbed to a one-month high of $1,614.50 a tonne. Copper also inched higher.

Source: Reuters