Dollar, Asian shares find relief in China, US economic news

Investors rediscovered a taste for the dollar and Asian shares on Thursday as upbeat Chinese and US economic news whetted appetite for riskier assets globally, even as tensions over North Korea simmered in the background.

Oil prices were upended as flooding and damage from Tropical Storm Harvey shut nearly a quarter of US refinery capacity, curbing demand for crude.

The resulting risk of fuel shortages sent US gasoline futures up 6.4 per cent in Asian trading to their highest in over two years. Prices have surged more than 20 per cent in the past week.

China manufacturing PMI

Adding to the brighter mood, a survey showed growth in Chinese manufacturing sector unexpectedly accelerated in August, confounding forecasts for a slight slowdown. The official version of the PMI firmed to 51.7, from 51.4 in July.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2 per cent, leaving it a modest 0.7 per cent firmer for the month so far.

Japan's Nikkei rose 0.6 per cent to its best level in two weeks, helped by a pullback in the yen. The index was still down 1.5 per cent on the month, however.

US GDP growth

Wall Street got a boost on Wednesday when data showed the US economy grew at an upwardly revised 3 per cent annualised pace in the second quarter, courtesy of robust consumer spending and strong business investment.

Other figures showed US private-sector employers hired 237,000 workers in August, the biggest monthly increase in five months and an upbeat omen for payrolls on Friday.

The Dow rose 0.12 per cent, while the S&P 500 gained 0.46 per cent and the Nasdaq 1.05 per cent. The better economic news helped distract from rumblings in the Korean peninsula and lifted the US dollar.

US-North Korea tensions

President Donald Trump had on Wednesday declared “talking is not the answer” to the tense standoff with North Korea over its nuclear missile development, but his defence chief swiftly asserted that diplomatic options remain.

Against a basket of major currencies, the US dollar held at 92.868 having crept away from a 2-1/2-year low of 91.621 touched on Tuesday. The dollar also bounced to 110.40 yen and off Tuesday's 4-1/2-month low of 108.25.

The euro recoiled to $1.1894 from its top of $1.2069, weighed in part by speculation the European Central Bank might start to protest at the currency's strength.

“The ECB meeting is coming up next week and there are rising risks of verbal intervention from Mario Draghi,” said Deutsche Bank strategist George Saravelos.

“Despite this the euro level does not appear particularly extreme and most importantly the ECB has not been driving recent appreciation anyway,” he added. “Verbal rhetoric may cause a correction but is unlikely to be enough to derail euro strength.”

Gold, crude oil

The bounce in the dollar kept gold restrained at $1,307.44 an ounce, just short of Tuesday's 9-1/2-month high of $1,325.94.

With so much US refinery capacity shut in the wake of Tropical Storm Harvey, oil prices were hit by demand concerns. Brent eased 10 cents to $50.76 a barrel, while US crude fell 3 cents to $45.93.