Dollar returned to its lowest in almost a year; Aussie Falls 

Stocks in Asia pared a back-to-back weekly advance while the dollar returned to its lowest in almost a year as investors assess an investigation into the U.S. president that may stall his economic agenda. The Australian dollar plunged the most since May after a speech by the central bank deputy governor.

The Bloomberg Dollar Index and Treasuries were steady following reports that U.S. special counsel Robert Mueller is expanding his investigation of President Donald Trump to examine his financial dealings. Reserve Bank of Australia Deputy Governor Guy Debelle said there was no significance in the board discussing the neutral rate, a comment in the central bank’s minutes earlier this week that had helped drive the Aussie within earshot of 80 U.S. cents.

Global equities have continued eking out fresh all-time highs this week as measures of volatility sank to fresh lows and investment-grade bond spreads tightened amid corporate results that have reinforced faith in earnings and the economy. While it’s early in the U.S. profits season, some 83 percent of companies so far have topped estimates on the bottom line. Asian shares are up more than four percent in the past two weeks, with markets in Japan and Hong Kong back retesting two-year highs this week.

Politics in Washington shot to the forefront of investor attention after central banks dominated proceedings earlier in the week. Transactions the U.S. special counsel is looking at include Russian purchases of apartments in Trump buildings. The news came less than a day after Trump told the New York Times that any digging into his finances would cross a red line.

Here are the main moves in markets:

Stocks

• Japan’s Topix index lost 0.2 percent. Australia’s S&P/ASX 200 Index declined 0.4 percent and South Korea’s Kospi index was up 0.4 percent.
• In Hong Kong, the Hang Seng Index fell 0.1 percent, while the Shanghai Composite Index was also 0.2 percent lower.
• Futures on the S&P 500 Index were little changed after the underlying gauge closed flat on Thursday.

Currencies

• The Aussie tumbled 0.9 percent to 78.87 U.S. cents as of 2:50 p.m. in Sydney, with the bulk of those losses coming in the wake of Debelle’s speech. The yield on three-year Australian government notes slipped seven basis points to 2.016 percent. RBA policy makers said in meeting minutes this week that a neutral nominal cash rate is estimated at around 3.5 percent. Governor Philip Lowe is due to speak next week.
• The Bloomberg Dollar Spot Index was slightly higher as of 1:50 p.m. in Tokyo, though still near the lowest since August, after losing 0.3 percent Thursday.
• The yen traded at 112.03 per dollar, a second week of gains for Japan’s currency.
• The New Zealand dollar hit a fresh 10-month high. Finance Minister Steven Joyce said he isn’t worried by the strength of the nation’s currency, saying it reflects strong economic fundamentals and exporters are coping.
• The euro held at $1.1626 after surging 1 percent on Thursday to a 23-month high. The European Central Bank President Mario Draghi signaled the bank would discuss language on bond purchases in the autumn. No decision has been made on timing or form of any tapering, Draghi said, adding that the Governing Council kept the timeline for discussions and tapering open.

Commodities

• WTI crude was little changed Friday, trading at $46.92 a barrel after losing 0.8 percent on Thursday.
• Gold was little changed at $1,244.69 an ounce. It’s up for a second week.

Bonds

• The yield on U.S. 10-year Treasuries held at 2.26 percent.
• Australian government notes with a similar maturity saw yields steady at 2.68 percent.

Source: Bloomberg – Dollar Stays Weak on U.S. Politics; Aussie Falls: Markets Wrap

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