HONG KONG: Asian markets saw further losses on Thursday, with Tokyo hit by a weaker dollar, as the rally that greeted 2018 gives way to profit-taking though Hong Kong extended a record winning streak to 13 days.
Bitcoin tumbled after South Korea said it was planning to close down cryptocurrency exchanges in the country citing fears over a bubble.
US traders sent all three of New York’s main indexes falling for the first time this year as they were spooked by a report saying Canadian officials increasingly expect Donald Trump to call time on the decades-old NAFTA free-trade pact.
That came after Bloomberg News said Chinese authorities reviewing foreign-exchange holdings have recommended slowing or halting purchases of US Treasuries.
The greenback sank against most of its peers soon after the news on fears that a huge amount of foreign demand for dollars would dry up.
But it bounced back on Thursday after China’s State Administration of Foreign Exchange refuted the report, saying in a statement on its website: “We think this story could be quoting a mistaken source or it could also be a piece of fake news.”
China has long invested heavily in US bonds as a way of controlling the value of its own yuan currency and Bloomberg News estimates it currently holds around $1.2 trillion in Treasuries, an amount that has doubled over the past 10 years.
“US Treasuries are often used during the political ping-pong match when trade tensions escalate,” said Stephen Innes, head of trading for OANDA in the Asia Pacific.
“It’s entirely possible that China could take measures to rebalance their reserve as they have done in the past,” Innes said.
Bitcoin takes a hit
He added that while the dollar was up against the yen Thursday, it is still struggling, “suggesting the market remains on guard against a quicker pace of BoJ tapering”.
The yen was already making inroads against the dollar after the Bank of Japan on Tuesday said it would cut back on its purchasing of bonds as part of its huge stimulus program.
The stronger yen — it is well down from the levels above 112 yen seen early Wednesday in Japan — hurt Tokyo-listed exporters, sending the Nikkei index 0.3 percent down.
Sydney and Seoul each lost 0.5 percent, Singapore eased 0.1 percent and Wellington tumbled 1.4 percent while Manila was also sharply down.
“It’s better to take some chips off the table — markets do look a little frothy,” Mikio Kumada, Hong Kong-based global strategist at LGT Capital Partners, told Bloomberg TV.
“Eventually there will be a sell off or a correction that will offer better opportunities.”
But Hong Kong rose 0.2 percent to notch up an outstanding 13-day unbeaten run, its best ever thanks to inflows of cash from mainland investors using a cross-border stock-connect program. Shanghai ended up 0.1 percent, pushing a winning streak to 10 straight days.
Oil prices were slightly down but remain at near three-year highs after a recent run-up helped by falling US stockpiles, unrest in key producer Iran and hopes that Trump’s tax cuts will boost demand.
Bitcoin dived 18 percent on South Korea’s Bithumb exchange following an announcement from Justice Minister Park Sang-Ki saying it would be “devastating if the bubble bursts”.
Also, financial authorities inspected six local banks that offered virtual accounts for corporate customers.
The South has emerged as a hotbed for cryptocurrency trading, accounting for some 20 percent of global bitcoin transactions and any move to limit trade in the unit hammers its price. On global exchanges the currency fell almost eight percent, according to Bloomberg News.
In early European trade London and Paris each rose 0.1 percent, while Frankfurt was flat.