Asian shares edged down on Friday ahead of US employment data later during the session, while the euro wallowed around two-year lows after European Central Bank President Mario Draghi vowed to take more easing steps to spark growth in the euro zone.
US non-farm payrolls data
Investors were likely to remain cautious ahead of the key US non-farm payrolls report. Solid gains in employment would increase speculation that the US Federal Reserve could raise US interest rates in the middle of next year.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down about 0.3 per cent, on track for a weekly loss of about 1.7 per cent.
Japan’s Nikkei stock average rose 0.4 per cent, poised to gain over 2 per cent for the week following the Bank of Japan’s surprise easing move on October 31.
“Valuation is still cheap, but people are cautious as the market seems overheated,’’ said Jun Yunoki, a strategist at Nomura Securities in Tokyo.
US stocks
On Thursday, Wall Street rose in a volatile session, with the Dow Jones industrial average and S&P 500 hitting record closing highs. European shares posted modest gains after ECB President Mario Draghi said further stimulus steps mean the ECB’s balance sheet would be as large as it was in March 2012, when it grew to €3 trillion.
Draghi’s remarks came after the ECB kept interest rates at a record low of 0.05 per cent.
“The trade in FX still centers around policy divergence and in Draghi’'s own words, the ‘main message’ today is that ‘ECB assets will expand as others contract.’
As long as there is a risk of additional easing from the ECB, the euro will remain under pressure,’ said Kathy Lien, managing director at BK Asset Management in New York, in a note to clients.
Euro to remain under pressure
But with speculators holding the largest amount of euro/dollar short positions since July 2012, the single currency is vulnerable to a short squeeze up to $1.2600, she said, and added that she viewed any euro rallies as an opportunity to sell before its eventual move down to $1.2250.
In Asian trading, the euro edged up to $1.2381 after brushing a more than two-year low of $1.2370.
The dollar bought 115.18 yen, not far from a fresh 7-year peak of 115.52 touched overnight.
Japanese cabinet ministers expressed concern about the yen’s rapid fall, suggesting that the government may be trying to ward off criticism that it is intentionally devaluing its currency to boost exporters’ competitiveness.
Later on Friday, the non-farm payrolls are expected to show a rise of 231,000 jobs last month after increasing 248,000 in September, according to a Reuters survey of economists. The jobless rate is seen steady at a six-year low of 5.9 per cent.
Unemployment claims
US data released on Thursday showed the number of Americans filing new claims for unemployment benefits fell more than expected to 2,78,000 last week, compared with forecasts of 2,85,000. Claims have now been below the 3,00,000 threshold for eight straight weeks, suggesting that employment growth was gaining momentum.
The Australian dollar fell to its weakest since July 2010 and was last flat on the day at $0.8558. In its quarterly monetary policy report, the Reserve Bank of Australia highlighted the strong local currency as a key source of uncertainty as the central bank forecast sub-par domestic growth.
In commodities trading, spot gold was steady at $1,140.80 an ounce, not far from a 4-1/2 year low and set to post its third straight weekly drop.
The stronger dollar and supply fears continued to pressure oil prices. Brent dropped about 0.5 per cent to $82.43 a barrel, while US crude fell about 0.3 percent to $77.66.