Japanese shares dropped Friday on yen-strengthening as traders awaited U.S. jobs data for clues on Federal Reserve rate actions.
Japan’s Nikkei Stock Average NIK, -0.34% declined 0.9% in early trade after a decline in the dollar sent the yen stronger. A strong yen makes Japanese exports expensive. The index was last down 0.3%.
Australia’s S&P/ASX 200 XJO, +0.04% was flat with Singapore’s FTSE Straits Index STI, +0.17% adding 0.4% and Hong Kong’s Hang Seng Index HSI, -0.02% gaining 0.6%.
The yen’s gain against the dollar comes as investors grow cautious about the U.S. economic outlook, and as traders second-guessed their once unshakeable belief in a continuous greenback rally driven by Fed rate rises.
Wednesday’s release of the minutes of the Fed’s meetings showed members were cautious about the U.S. economic outlook, and expressed “uncertainty” about the policies of President-elect Donald Trump.
“There is a recognition that the continued rise of the dollar could move growth elsewhere [out of the U.S.],” said Greg McKenna, the chief market strategist at forex broker AxiTrader. McKenna added, moreover, that “currencies are bidirectional and there isn’t just one direction that the dollar can go.”
The WSJ Dollar Index, which measures the U.S. currency against 16 others, fell 1% to 92.08 in U.S. trade Thursday, losing steam from the 14-year-highs it hit earlier in the week. The index was last up 0.1%.
Investors are preferring to err on the side of caution ahead of U.S. non-farm payrolls data, due later in the global trading day. A weaker number could prompt the Fed to pull back on its rate-raise trajectory.
Traders believe the U.S. economy added 178,000 jobs in December, said Alex Furber, a sales trader at CMC Markets quoting consensus estimates.
The stronger yen weighed on exporter stocks. Nissan 7201, -2.21% lost 1.7% and Honda 7267, -1.91% traded down 1.6% with Mitsubishi Motors 7211, -2.64% losing 2.2%. Financial stocks also fell, with T&D Holdings 8795, -2.31% sliding 3% and Sompo 8630, -0.32% shedding 1.3%.
Separately, Toyota Motor 7203, -1.69% was down 2% after Trump criticized the car maker for its plan to build Corolla sedans at a Mexican plant. Trump threatened in a Twitter message to impose a tariff on imported Corolla sedans. Mazda Motor 7261, -3.17% also dropped 2.6% as it also has a plant in Mexico.
“I don’t expect much bigger declines [in Toyota],” as Trump spoke in generalities, said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management. The wider worry is if Trump’s jawboning extends to matters such as a weaker yen hurting the U.S. labor market.
Elsewhere in the region, Korea’s Kospi SEU, +0.35% added 0.4%. In Korea, Samsung Electronics 005930, +1.80% gained as much as 2.5% after it estimated that its fourth quarter would deliver its biggest quarterly operating profit in almost three years. Samsung leans heavily on growth from component manufacturing and sales even as it lost billions of dollars from a massive recall of its Galaxy Note 7 smartphones.
Meanwhile, China guided the yuan to its strongest level since Dec. 6 in its daily fixing after the dollar continued to retreat overnight. The central bank set the yuan 0.9% stronger, putting the daily USD/CNY midpoint at 6.8668.
The Shanghai Composite SHCOMP, -0.35% was up 0.1% as investors bet on large-cap stocks with in monopolized industries after Beijing urged a reform towards public-private ownership in these sectors to attract capital.
