By Lisa Twaronite
Asian shares slumped on Friday, on track for a weekly loss as plunging crude prices heightened fears about receding global growth, while China’s yuan hit its weakest level in more than four years.
A supply glut in oil markets and cooling growth in China, the world’s biggest commodities consumer, have pressured many asset markets ahead of a widely expected hike to U.S. interest rates by the Federal Reserve next week.
China’s central bank set its guidance rate at the weakest level in more than four years on Friday, a sign Beijing is permitting the currency to depreciate after it was included in the International Monetary Fund’s reserve basket.
The lower fixings have also raised questions about how far the central bank intends to let it depreciate.
In the spot market, the yuan CNY=CFXS was changing hands at 6.4515 in early trade, taking out its August low hit after the unexpected devaluation of the Chinese currency. It also marked the lowest level since the middle of 2011.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS erased early gains and was down about 0.4 percent, facing a weekly loss of 2.7 percent.
Chinese shares were lower ahead of a spate of economic data scheduled to be released on Saturday. ECONCN
Japan’s Nikkei stock index .N225 bucked the trend, buoyed by overnight gains on Wall Street and a weaker yen, adding 0.9 percent. But it was still headed for loss of 1.4 percent for the week.
The dollar index .DXY, which tracks the U.S. unit against a basket of six major rivals, was up about 0.1 percent at 98.044. But it was on track for a weekly loss of about 0.3 percent after investors trimmed dollar-long positions ahead of next week’s U.S. Federal Reserve meeting at which the central bank is widely expected to hike interest rates for the first time in nearly a decade.
Fed fund futures place an 85 percent chance of the Fed raising rates at its Dec. 15-16 meeting. A recent Reuters poll also showed that all but one of 18 brokerages that deal directly with the Fed expect a rate increase.
The euro EUR= edged down about 0.1 percent to $1.0933 but still up about 0.4 percent for the week after comments from the European Central Bank’s Ewald Nowotny raised doubts about the extent to which U.S. and European monetary policy will diverge.
The dollar added 0.4 percent against its Japanese counterpart to 122.07 JPY= but was still down around 0.8 percent for the week.
Despite this week’s weaker dollar, U.S. crude oil futures continued to wallow close to 2009 lows on oversupply fears, shedding 0.8 percent to $36.47 a barrel. Brent LCOc1 skidded 0.7 percent to $39.47.
U.S. dollar weakness and lower commodity prices “do not normally come hand in hand as dollar weakness generally drives commodity prices higher but nothing seems to matter more this week than position adjustments,” Kathy Lien, managing director at BK Asset Management, wrote in a note to clients.
South Africa’s rand, meanwhile, plumbed record lows against the U.S. dollar after the abrupt dismissal of respected Finance Minister Nhlanhla Nene to make room for an ally of President Jacob Zuma.
The rand ZAR= sunk as low as 15.4895 against the greenback, and was last at 15.3740.
(Editing by Shri Navaratnam)