By Willa Plank

Likelihood of U.S. rate hike weighs on Asian currencies

Asian markets were broadly down Thursday, in response to strong overnight U.S. economic data Thursday that pointed to rate rises, more dollar strength and the possibility of more capital flight from Asia.

Durable goods orders in the U.S. rose 4.8% in October from a month earlier, well above the 2.7% gain predicted by economists surveyed by The Wall Street Journal. A gauge of U.S. consumer sentiment rose in November, signaling rising confidence in the economy.

Australia's S&P/ASX 200 was trading slightly lower, down 0.1%, Hong Kong's Hang Seng Index was down 0.5%, South Korea's Kospi sank 0.5%, but Japan's Nikkei was up 1%.

On the plus side, the data augured well for U.S. demand for Asia-Pacific goods and commodities.

"I was very surprised to see strong European PMIs [purchasing managers indices] and very strong U.S. data as well...it's boding well for risk appetite," said Christoffer Moltke-Leth, director of global sales trading at Saxo Capital Markets.

But more significant for Asia, the data also ramped up expectations for interest rate increases in the U.S., rising yields and more capital outflows from emerging Asia.

"There are concerns about emerging markets," said Moltke-Leth, pointing to Malaysia, Indonesia and the Philippines.

Minutes from the U.S. Federal Reserve's November meeting indicated officials believed a rate increase could become appropriate "relatively soon" if data continued to show an improving economy.

This has boosted the dollar against most Asian currencies.

The Korean won fell 0.2% against the dollar Thursday, the Indonesian rupiah was off 0.4%, and Japanese yen slipped 0.1% and the Malaysian ringgit slid 0.4%.

Japan stocks, as usual, were a beneficiary of this trend, as a weaker yen boosts the competitiveness of the country's exporters.

A weaker yen is expected to continue being "very favorable" for equities, said Hisao Matsuura, chief strategist at Nomura. As a result, earnings revisions are expected as early as next quarter from exporters such as car companies. "How much they recover will show how much things have improved," said Matsuura.

Hong Kong stocks were sliding as currency headwinds hurt offshore interest in Chinese companies listed on the index. The Shanghai Composite was up slightly.

China's central bank fixed the yuan 0.26% weaker against the U.S. dollar Thursday, and has guided the currency weaker for most of this month amid a broad-based rally in the U.S. dollar.

"The CNY [yuan] depreciation will be more negative to Chinese companies that have offshore [listings]," said Alexander Lee, research director at DBS Vickers. "These tend to be China properties, airlines and some of the environmental companies."

Singapore stocks also fell after the city state narrowed its growth forecast for this year. The FTSE Straits Times Index was down 0.2%.

Jingyi Pan, market strategist at IG, says the manufacturing sector and construction sector were growing slower, on a year-on-year basis, while the services sector saw no growth. "The wholesale trade and finance and insurance sectors could continue to face external headwinds," the ministry says. Among major stocks, DBS was down 0.4% and United Overseas Bank was down 1%.

(END) Dow Jones Newswires

November 23, 2016 22:27 ET (03:27 GMT)

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