Asia Session: Another Jumpy Session for Investors in Asia

It was choppy season in Asia, with investors driving commodity currencies to multi-month lows against the dollar. Yesterday, Chinese premier Wen didn’t paint a pretty picture of China’s future if things don’t change in Beijing. His warnings led investors to the conclusion that the government’s crackdown on real-estate speculation will keep officials from relaxing current restrictions to Chinese growth, and given China’s accounts for a large percentage of global commodity demand, when combined with the Fed apparently taking QE3 off the table in the near-term the news didn’t bode well for commodity prices.

Gold struggled to recover from the overnight sell-off as it spent most of the session hovering just above the overnight low around USD1633.90. AUD/USD briefly touched the overnight high around 1.0471, but price action proved too weak to drive the pair through this resistance level. It was a similar story for NZD/USD, which failed to break through resistance at around 0.8111.

Commodity currencies may continue to come under pressure if fears about a hard landing in China persist. Wen’s speech after the NPC meeting highlights the difficulties faced by Beijing in regards to loosening policy. Whilst China has a lot of room to move when it comes to easing existing growth restrictive policies, it also has to consider the impact this would have on the already inflated real-estate sector.

The dip in commodity prices helped drag down the basic materials sector in Australia by around 1.22%, causing the ASX 200 to finish around 0.22% in the red. Yet, the Nikkei 225 is currently up by around 0.90%, with shares being bolstered by the weakening yen.

In Beijing, figures released by the Ministry of Commerce showed foreign direct investment in China fell for a fourth straight month as companies struggled with slack levels of external demand stemming from the European debt crisis. Investment slid by 0.9% to USD7.73bn in February from a year earlier, and overseas spending in the first two months of the year dropped to USD17.7bn.

Ahead in the London session, the SNB is expected to release the Libor rate and its monetary policy assessment at 8:30GMT, with the market expecting the SNB to leave rates unchanged at <0.25%. Later in the session, we are expecting PPI and unemployment data out of the US at 12:30GMT – consensus estimates are for a 0.5%m/m increase in producer prices and a 357K headline initial jobless claims figure.