The euro held near two-year highs against the dollar on Friday after the head of the European Central Bank said tapering of its stimulus will be on the table this autumn, while a solid global economic outlook kept Asian share prices near decade highs.
While ECB President Mario Draghi set no date for changes to the bond-buying plan, investors took his comments on Thursday as confirming their expectations that the discussions would lead to monetary tightening next year.
“Although bond markets didn't take his comments as something particularly new, the currency market liked the fact that Draghi confirmed his stance towards tapering,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
In early Asian trade, the euro stood at $1.1630, maintaining its 1 per cent gain on Thursday, its biggest since June 27, when Draghi first sparked expectations that the ECB will dial back its bond-buying scheme.
Signs of steady global growth, which have prompted the ECB and a couple of other major central banks to signal future tightening since last month, have kept the world's shares on a firm footing.
MSCI's broadest index of Asia-Pacific shares outside Japan, which has gained about 5 per cent in the past two weeks, eased 0.2 per cent on Friday. Japan's Nikkei dropped 0.3 per cent as the yen rose against the dollar.
MSCI's gauge of stocks across the globe was little changed after rising for a 10th straight session on Thursday, its longest such streak since February 2015. It has advanced 3.1 per cent in the latest rally.
“Strong global growth and decent earnings outlook are supporting shares globally,” said Tatsushi Maeno, senior strategist at Okasan Asset Management.
US quarterly earnings
US quarterly earnings are expected to have climbed 8.6 per cent, above the 8-percent rise projected at the start of the month, according to Thomson Reuters I/B/E/S. About 15 per cent of S&P 500 companies having posted results so far.
Still, the major US indexes were almost flat on Thursday, not helped by concerns about US President Donald Trump's inability to push his through healthcare reform Bills, the passage of which will be needed to finance his tax cut plans.
The dollar was also dogged by similar concerns, with its index against a basket of major six currencies hitting its lowest level since August on Thursday.
Against the yen, the US currency hit a three-week low of 111.48 yen on Thursday even after the Bank of Japan Governor Haruhiko Kuroda dropped no hint of following other central banks in curtailing many years of stimulus. It last stood at 111.87 yen.
While the euro gained sharply on Draghi's comments, global bond markets reacted more calmly, partly as he did not give a clear signal on when the ECB will announce its tapering.
Treasuries yield
The 10-year US Treasuries yield dropped to 2.238 per cent, its lowest in three weeks, on Thursday and last stood at 2.261 per cent. The 10-year German Bund yield also ended down at 0.531 per cent from close of 0.543 per cent the day before.
“I think it is unlikely that Draghi will announce tapering in September. Before the ECB reduced its bond purchase in April, Draghi had asked his staff to look into options in September, and three months later in December he made an announcement," said Hideki Kishida, a senior economist at Nomura Securities.
“This time he hasn't even tasked his staff to prepare options,” he added.
Crude oil
In commodities, oil prices were little changed after choppy trading the previous day, as nagging worries about abundant global crude supplies sank prices after an early rally had boosted Brent above $50 per barrel for the first time since June 7.
Traders predicted prices would hold near current levels ahead of Monday's meeting between key OPEC and non-OPEC producers in St. Petersburg, Russia.
Brent crude futures traded at $49.26 per barrel, down 0.1 per cent on day.