The Australian sharemarket got off to a shaky start as the dollar fell to a three-month low, but bargain hunting lifted the market firmly into the black as weaker currencies across Asia triggered a broad rally in regional markets.
The dollar fell 1.3 per cent to a low of US89.25¢ after Prime Minister Tony Abbott joined Reserve Bank governor Glenn Stevens in “jawboning” the currency lower.
The S&P/ASX 200 index lost 0.3 per cent in early trade before rallying to close 35.9 points, or 0.71 per cent, at 5098.4 points as investors shrugged off mounting expectations the US Federal Reserve could announce tapering plans next week.
In an unusual moment of clarity for a central banker, Mr Stevens made the “stunning” comment that a level of US85¢ was more appropriate for current economic conditions, while Mr Abbot said the Reserve could use its recent top-up of capital to drive the dollar lower.
Australian government 10-year yields were little changed at 4.328 per cent as the weaker dollar was expected to provide stimulus in place of another rate cut.
Last night the US S&P 500 index lost 0.4 per cent as the US dollar rallied against most major currencies and US 10-year yields rose another 2 points to 2.87 per cent, reflecting heightened fears of a Fed tapering announcement, as better-than-forecast November retail sales raised the odds.
Underscoring the jitters, ANZ strategists reported that there were broad-based outflows from Asian markets over the past week, with a near doubling in “emerging Asian” markets.
ANZ currency strategist Richard Yetsenga said developed markets saw inflows, supporting their theme of “reversification” - a trend away from high yielding markets.
“With the US data surprising on the upside, and tapering coming soon (we expect it to begin at next week’s FOMC meeting), our reversification thematic will intensify, rather than ease off,’ he said.
The Shanghai composite index was flat at the close of the ASX as Chinese investors awaited news on the official growth target for next year.
In Tokyo the Nikkei index rallied from the red to a one per cent gain as the yen dropped to a five-year low against the greenback.
Gold tumbled $US38 to $US1227, copper was little changed at $US7200 a tonne and yesterday spot iron ore fell 0.9 per cent to $US137.90 a tonne.
IG market analyst Evan Lucas described Friday’s performance as a technical bounce in the absence of any key drivers.
“People are finding value after the miners and the big four banks were hit hard over the past six days,” Mr Lucas said.
“A bit of bounce was expected.”
Friday’s rise came as the Australian dollar fell below 90 US cents for the first time since early September, after encouraging economic data from the United States and Reserve Bank Governor Glenn Stevens’ comments that the dollar was still too high.
Westpac gained 18 cents to $31.00 as it held its AGM, where it indicated talk about confidence rising since the election had not translated into greater business loan activity. NAB added 31 cents to $33.35, Commonwealth Bank gained 69 cents to $74.20, while ANZ shed 10 cents to $30.25.
BHP Billiton gained 31 cents to $35.85, Rio Tinto dropped five cents to $65.09 and Fortescue Metals was steady at $5.36.
Crown Resorts was one of the worst performers, dropping 72 cents, or 4.3 per cent, to $15.90 after the Victorian government increased its poker machine levy.
The broader All Ordinaries index was up 32.3 points, or 0.64 per cent, at 5101.5.
The December share price index futures contract was 37 points higher at 5094, with 43,242 contracts traded.
National turnover was $1.27 billion securities worth $4.38 billion.