Dollar extends gains after strong U.S. economic growth, Asian stocks subdued

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A man walks past an electronic stock board showing Japan’s Nikkei 225 index at a securities firm in Tokyo, on March 30, 2017. (Eugene Hoshiko/AP)

The dollar extended its overnight gains in early Asian trade on Friday on signs of strong U.S. economic growth, while the euro inched up after sliding overnight on data suggesting slowing growth in Europe.

Stock markets in Asia were off a bit despite solid gains on Wall Street as investors awaited China’s official manufacturing purchasing managers index data for March.

The focus will be on whether the uptick in activity over the past few months holds up. The data is expected at 0100 GMT.

MSCI’s broadest index of Asia-Pacific shares outside Japan retreated 0.2 per cent, poised to post an almost 13 per cent gain for the first three months of the year.

Japan’s Nikkei jumped 0.5 per cent after Japanese core consumer prices rose 0.2 per cent in February. While that is the fastest annual pace in nearly two years, it is still a far cry from the central bank’s 2 per cent target.

The Japanese benchmark is set to end the first quarter up 0.3 per cent “The prospect of unpredictable flows in the foreign exchange, bond and equity markets is high as we head into the last day of the month, and more importantly, quarter end,” Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.

The South African rand dropped to a seven-week low after President Jacob Zuma sacked finance minister Pravin Gordhan in a cabinet reshuffle after days of speculation that has rocked the country’s markets and currency, replacing him with home affairs head Malusi Gigaba.

A statement from the president’s office just after midnight on Thursday said Zuma had also appointed Sfiso Buthelezi as Deputy Finance Minister replacing Mcebisi Jonas.

The dollar was up 1.1 per cent at 13.44356 rand, on track to end the week more than 8 per cent higher.

Overnight, all three major Wall Street indexes closed about 0.3 per cent higher after fourth-quarter annualized growth in U.S. growth domestic product was revised up from the previously reported figure. Consumer spending growth was also revised up.

The upbeat data also helped lift the dollar, which pulled back slightly early on Friday.

The dollar index, which tracks the greenback against a basket of six peers, rose almost 0.1 per cent to 100.47, after hitting Thursday’s two-week high of 100.6 again. Despite this week’s gains – it is up almost 1.7 per cent since Monday’s four-month low – the greenback is set to end the quarter 1.7 per cent lower.

The dollar pulled back about 0.1 per cent to 111.78 yen after Thursday’s 0.8 per cent jump.

The euro crawled up 0.1 per cent to $1.0686 in an effort to make up some of Thursday’s 0.8 per cent tumble. The common currency is on track to post a gain of 1 per cent for March and 1.6 per cent for the quarter.

Data showed German and Spanish consumer inflation slowed more than expected in March on a pull back in oil prices, disappointing investors who were hoping for a winddown of the European Central Bank’s monetary stimulus.

In commodities, oil prices retreated early on Friday.

U.S. crude slipped 0.2 per cent to $50.25 a barrel. On Thursday, it closed 1.7 per cent higher after zipping to a three-week-high earlier in the session after Kuwait backed an extension of OPEC production cuts to ease a global glut.

It is heading for a 6.4 per cent loss for the week.

Gold was steady at $1,242.71 an ounce, after losing 0.7 per cent on Thursday on the dollar’s strength, but remains set for an almost 8 per cent quarterly gain.