Dollar holds gains into Asia, Tokyo stocks rise

 

The dollar held a stronger tone into Asian trade on Wednesday after US retail sales reinforced expectations the US Federal Reserve could soon start paring its monetary stimulus, with the weaker yen helping Japanese stocks rise to one-week highs.

 

A rise in yields on benchmark US 10-year Treasuries to their highest in nearly two years buoyed the dollar as investors prepared for a tapering of the Fed's $85 billion-a-month bond buying, perhaps as soon as September.

 

The dollar bought 98.21 yen, moving further away from a seven-week low of 95.810 hit last week.

 

The dollar "could be poised for additional gains because at the end of the day, the Fed is still gearing up to reduce asset purchases - the only question is when," BK Asset Management managing director of FX strategy Kathy Lien said in a note to clients.

 

US retail sales excluding cars, gasoline and building materials rose 0.5% in July, the largest increase since December.

 

Atlanta Fed President Dennis Lockhart said it was too early to detail plans for a tapering, but did not rule out the possibility of it starting next month. His suggestion it would neither be sudden or drastic gave a boost to sentiment in US stock markets that carried into Asian trade.

 

MSCI's broadest index of Asia-Pacific shares outside Japan was slightly lower, while Japan's benchmark Nikkei stock average rose 0.5% in early trade.

 

European indicators also painted a brighter picture. Germany's ZEW economic sentiment survey was upbeat and euro zone industrial output rose, and UK house prices increased at their fastest pace in seven years.

 

Data on Wednesday is expected to show that in the June quarter the euro zone economy moved out of its longest recession, eking out growth of 0.2%.

 

In commodities markets, copper added 0.2% to$7,286 a tonne on expectations of tighter-than-expected stockpiles in China, while gold slipped after the US retail sales data and was last at $1,321.89 per ounce.

 

Brent crude prices slipped 0.3% to $109.48 a barrel.

 

The Hong Kong Exchange delayed the start of trading on both the securities and derivatives markets on Wednesday due to Typhoon Utor. It will suspend the morning trading session if the typhoon signal remains at 8 or higher at 9 a.m. Hong Kong time (0100 GMT).