Dollar firm on Geithner comment, stocks struggle

Friday, 22 October 2010 03:20 - - {{hitsCtrl.values.hits}}

SINGAPORE (Reuters) - The dollar rose on Thursday after U.S. Treasury Secretary Timothy Geithner said ahead of a G20 meeting that major currencies were roughly in alignment, initially offering support to Japanese stocks.

However, Tokyo shares reversed course by the close as the dollar’s gains eased and Europe picked up the weaker cue to open lower. Major stock indexes in Britain, Germany and France fell 0.2 percent to 0.4 percent at the start of trade.

A batch of China data, which showed a slowdown in economic growth to a still healthy level, had little impact on markets following the country’s surprise rate rise earlier in the week.

Speculation of a grand bargain by the Group of 20 to rebalance the global economy is swirling, with G20 finance leaders meeting on Friday in South Korea to tackle the thorny issue and find a common path ahead of a leadership meeting in Seoul next month.

The Wall Street Journal on Thursday said Geithner had suggested in an interview that he saw no need for the dollar to sink further against the euro and the yen. The news prompted the dollar, which has been in a downtrend for several weeks, to spike half a yen and climb rapidly against the euro.

The dollar rose as far as 81.84 yen but quickly pulled back to 81.20 yen, up just 0.1 percent on the day. Early in the session, it had dipped to 80.98 yen, close to a 15-year trough and nearing a record low at 79.75 yen set in 1995.

The dollar rise boosted hopes for Japan’s exporters, helping to lift the benchmark Nikkei average into positive territory. However, it later closed down a slight 0.05 percent for its lowest close in three weeks as the dollar came off its highs.

“Today’s moves showed how nervous investors were about the yen’s strength,” said Yumi Nishimura, deputy general manager at Daiwa Securities Capital Markets.

“Chinese economic data was roughly within expectations, and few people expect the country will have another rate hike soon, but Shanghai stocks are down and external factors are influencing Japanese stocks,” Nishimura said.

The MSCI index of Asia shares outside of Japan rose 0.4 percent as gains in consumer durables and health care offset a drag from financials and telecoms.

CHINA GROWTH COOLS BUT STILL ROBUST

Data from China showed the world’s fastest growing major economy touched the brakes in the third quarter. Annual GDP growth eased to 9.6 percent from 10.3 percent in the second quarter. Inflation ticked higher and overall the data was broadly in line with expectations.

The Shanghai stock market briefly turned positive after the data but quickly surrendered the gains and closed down 0.7 percent as investors took profits on bank shares.

China Mobile’s lacklustre third-quarter results put a dampener on the telecom sector in Hong Kong, pulling shares of the world’s biggest mobile operator and those of its rivals lower.

Hong Kong’s Hang Seng index was trading up 0.5 percent.

Gold edged up in volatile trade off the back of the China data, which helped offset pressure from the dollar’s firmer tone. Spot gold added 30 cents to $1,343.80 an ounce.

Oil slipped 0.5 percent to $82.15 per barrel.