FTSE 100 LIVE: Asian stocks struggle to build on Wall Street gains as US dollar rises

MSCI’s broadest index of Asia-Pacific shares outside Japan was steady after two days of declines.

Japan’s Nikkei dropped 0.6 percent. Markets in Shanghai and Hong Kong opened flat, the ASX 200 rose 1.6 percent and South Korea’s Kospi fell 0.8 percent on a jump in coronavirus infections.

“I think that reflects a lingering caution. The pandemic is still a concern…non-tech stocks are still weighed down by COVID-19,” said Bank of Singapore analyst Moh Siong Sim.

Meanwhile, the US dollar is at a two-month high as inflation fears begin to fade.

A strong dollar kept Asia’s currencies on the back foot, extending gains that had begun with hawkish remarks from a senior US Federal Reserve official overnight.

The greenback rose 0.2 percent against a basket of currencies to its highest since late July.

It gained by the same margin against the euro and yen and a little further against the Aussie to hit a six-week peak. 

Chicago Fed President Charles Evans, due to become a voter on the Federal Open Market Committee in 2021, said overnight the Fed still needed to discuss its new inflation approach but it “could start raising rates before we start averaging 2 percent.”

That crimped inflation expectations, lifted US real yields and set the dollar rising.