Dollar Resumes Increase, Asia Shares Inch up in Positive Start to 2017

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On Tuesday, Global market marched confidently in 2017 with Asian stocks extending gains after European shares increased to their peaks in a year, while the greenback restarted its hike after the previous week’s stumble.

Markets were sustained by indications of solid factory development  in China and Europe, giving the global manufacturing sector a solid improvement heading into the new year.

MSCI’s broadest index of Asia-Pacific shares outside Japan increased 0.4% as most regional markets resumed after the New Year holiday. It ended 2016 with a 3.7% increase, its best year in four.

For an extended New Year holiday, Japan was closed.

Australian shares (AXJO) were the best performers in the region with a 1.2% increase. Hong Kong’s Hang Seng (HIS) increase 0.5%.

In China, both the CSI 300 index (CS1300) and the Shanghai Composite (SSEC) saw a 0.8 % increase. China was Asia’s poorest performing major stock market in 2016 with a 11.3% loss in its worst year in five.

A private business survey showed China’s factory activity increased more than projected in December as demand accelerated, with production reaching a near six-year peak.

“A year ago, the Chinese markets kept everyone on their toes,” said Jingyi Pan, market strategist at IG in Singapore, referring to market turmoil in China that engulfed global investors last January.

“I don’t think that we will see a repeat given that the global economy has a better foothold compared to a year ago,” Pan said.

“Nevertheless, the market is always adjusting and will likely recognize that the full year growth results and clarity into (U.S.) President-elect Donald Trump’s policies will influence market direction in the near term.”

The dollar index which tracks the dollar against a basket of six global peers, increase 0.5%, its biggest one-day advance since Dec. 15, as the outlook of higher U.S. interest rates kept sentiment bullish.

On Tuesday, the greenback  dragged back 0.1% to 117.38 yen, after jumping nearly 0.6% on Monday, its biggest one-day increase  in over  two weeks.

“Following a period of consolidation between now and late January, we believe the USD will put on another 10 percent of gains over the next eighteen months,” said Richard Grace, chief currency strategist at Commonwealth Bank of Australia.

U.S. S&P futures increase 0.3% during the Asian morning. Wall Street was closed for the New Year holiday on Monday.

On Monday, Britain and Switzerland are  also close. Europe’s STOXX 600 index added 0.5% to hit its highest level since Jan. 4, 2015.

That came on the heels of data, presenting manufacturers ramped up activity at the quickest  pace in more than five years in December.

In spite of the positive figures, the euro fell 0.6% on Monday. It inched up 0.2% to $1.0472 on Tuesday.

Investors are monitoring the Chinese yuan after the central bank almost doubled the number of foreign currencies in a basket used to set the renminbi’s value.

On Additional News

Starting on January  1, 2017, the number of currencies in the CFETS basket surged from 13 to 24, with new participants, including the Korean won, the South African Rand and the Mexican peso.

In its first fix since the change, and on Tuesday,  the Chinese central bank sets the official yuan midpoint at 6.9498 per dollar, compared with the prior close of 6.9467. It destabilized further to 6.9548 at 0303 GMT (10.03 p.m. ET).

In year 2016, the Renminbi has published its biggest yearly loss since 1994, with the greenback  up nearly 7% versus the Chinese currency.

On Saturday, China’s foreign exchange regulator stated that from Jan. 1, it would increase scrutiny on individual foreign currency purchases and toughen punishment for illegal money outflows, although the $50,000 yearly individual quota will remain unmoved.

In commodities, oil prices increased following  a historic deal between OPEC and non-OPEC producers decrease  production took effect on Jan. 1. Oil was the world’s best-performing asset class in 2016, with a gain of approximately  50%.

U.S. crude  added 0.7% to $54.07 a barrel. Global benchmark Brent (LCOc1) jumped as much as 1.8% before settling down to trade 0.6% higher at $57.18.

Gold also increases after initial losses, with the precious metal adding about approximately 0.4% $1,156.36.

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