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 Japanese stocks skidded, with the Nikkei <.N225> slipping 0.1
percent while MSCI's broadest index of Asia-Pacific shares outside
Japan <.MIAPJ0000PUS> were almost flat after initial losses.
Wall Street's failure to extend its rally above historical highs on
Wednesday did not help soothe the anxiety that a wider conflagration
in Ukraine could lead to more risk aversion and damage vulnerable
emerging markets.
Russian President Vladimir Putin ordered drills by his armed forces
to test combat readiness in western Russia, near the border with
Ukraine, prompting Washington to warn a military intervention would
be a "grave mistake.
The Russian rouble tumbled to a five-year low against the dollar and
all time-lows against the euro.
The Ukrainian hryvnia hit record lows on Wednesday after Ukraine's
central bank said it was abandoning a managed exchange rate policy.
Safe-haven U.S. Treasuries benefited from the somber mood in
markets, with the 10-year U.S. debt yield falling to a three-week
low of 2.662 percent, despite surprise strength in U.S. new home
sales data.
Investors are now looking to comments from Fed chief Janet Yellen's
testimony at a U.S. Senate committee on Thursday on her views on a
recent run of soft U.S. data, which investors chalk up to bad
weather, rather than weakening in the fundamentals.
The dollar also strengthened broadly, with the dollar index <.DXY>
hitting its highest level in about two weeks.
"Given U.S. debt yield fell and that U.S. shares were steady to
softer, the dollar's strength should be regarded as a reflection of
risk aversion rather than rising confidence in the U.S. economy,"
said Masafumi Yamamoto, chief strategist at Praevidentia Strategy.
The euro traded at $1.3681, after having fallen 0.4 percent to
two-week lows on Wednesday. Against the yen, which also tends to
rise when markets are under stress, the dollar was little changed at
102.37 yen.
The tense backdrop could put renewed pressure on many emerging
market currencies and shares, which were battered earlier this year
on concerns about slower global growth and the tapering of the U.S.
Federal Reserve's monetary stimulus.
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One of the hardest hit countries, Turkey saw its lira slipping to
three-week lows, dented also by a corruption scandal embroiling
Prime Minister Tayyip Erdogan's government.
Brazil's central bank raised its benchmark interest rate on
Wednesday to 10.75 percent from 10.50 percent as expected, slowing
the pace of monetary tightening to avoid hurting an economy that is
flirting with recession.
The Chinese yuan rebounded from a seven-month low hit on Wednesday,
though it traded below the daily fixing set by Beijing for a third
consecutive day.
The renminbi stood at 6.1231 per dollar, off Wednesday's low of
6.1351 but below the fixing at 6.1224.
Traders suspect the People's Bank of China (PBOC) is possibly aiming
to inject more two-way volatility into the market and prepare it for
more reforms.
"It's possible that the Chinese authorities think they need a weaker
yuan now to bolster the economy," said Hirokazu Yuihama, senior
strategist at Daiwa Securities.
The CSI300 <.CSI300> of the biggest Shanghai and Shenzhen A-share
listings rebounded slightly on Thursday after having slipped to
eight-month low on Wednesday on concerns over slowdown as well as
fear of lending curbs.
Copper dropped to a three-month low of $7,002.50 a metric ton,
extending its losses over the past week on concerns about slower
growth in China.
Gold also stepped back after hitting a four-month high on Wednesday
as the dollar strengthened broadly. It last stood at $1,325.90 an
ounce, off Wednesday's high of $1,345.35.
(Editing by Shri Navaratnam and Eric
Meijer)
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