Asian shares capped, sterling remains vulnerable
Mar 13 2013 , Tokyo
The Dow Jones Industrial Average marked another record high close on Tuesday, rising for an eighth straight day, while European shares retreated from modest gains at the end of the session, just shy of a fresh 4-1/2-year closing high.
The MSCI's broadest index of Asia-Pacific shares outside Japan was nearly flat, weighed down by a 0.3 percent drop in Australian shares. Australian shares hit a fresh 4-1/2-year high on Tuesday.
Seoul shares opened up 0.1 percent, after hitting a three-week low on Tuesday, as sentiment was dampened by worries about tensions with North Korea and the weaker Japanese yen.
Japan's Nikkei stock average opened down 0.5 percent, after snapping an 8-day winning streak which took the index up to a 4-1/2-year high on Tuesday.
"Investors' risk appetite hasn't changed on expectations of aggressive policy easing from the BOJ and hopes for further weakness in the yen. But a correction is not surprising while the yen's weakness has paused," said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities.
The dollar fell 0.2 percent to 95.90 yen after rising to 96.71 yen on Tuesday, its highest since August 2009. The euro fell 0.1 percent to 124.90 yen, after reaching a one-month high of 126.03 on Tuesday. Expectations for much bolder monetary easing from the Bank of Japan when a new leadership takes over next week have kept yen under pressure.
In contrast, Australia's relatively high yields and the Reserve Bank of Australia lack of haste to cut interest rates soon appear to have drawn investors to the Australian dollar, which was up 0.1 percent to $1.0327.
Sterling weakened after data published on Tuesday showed a surprise fall in British industrial output in January, pushing the pound down to $1.4832, its lowest since late June 2010.
Against the Australian dollar, the pound skidded towards A$1.4370, lows not seen since 1985.
"Sterling's weakness on the foreign exchanges remains intact as an absence of fresh initiatives from the Bank of England, and the lack of room to ease fiscal policy, leave much onus on a weaker pound to help stimulate growth," ANZ said in a note.
The euro was steady around $1.3027, after being weighed down by a warning on Tuesday from Bundesbank chief Jens Weidmann, who is also a member of the Governing Council of the European Central Bank, that the euro zone's crisis has not ended.
Investors will watch bond sales from highly-indebted euro zone countries to gauge the degree of anxiety. Italy will offer three-year and 15-year bonds at an auction later on Wednesday, while Spain plans to sell bonds due 2029, 2040 and 2041 at a special, off-calendar auction on Thursday.