(Bloomberg) -- Asian equities pared their biggest weekly gain in six weeks as investors paused for breath after a rally fueled by optimism that the Federal Reserve’s pace of tightening will be gradual. The dollar held its biggest slump in a month.
The MSCI Asia Pacific Index lost 0.3 percent as Japanese shares led declines, with exporters dragged lower by the yen’s advance. The Bloomberg Dollar Spot Index maintained most of the last session’s 0.7 percent retreat. Crude traded at $40.59 a barrel. Treasuries rose Thursday as investors showed few signs of unease after the U.S. central bank signaled it’s likely to raise interest rates next month.
“The Fed has made it clear that its base case is for a lift-off in December and if they were to break that, it would be a huge, market-moving event,” said Evan Lucas, Melbourne-based strategist at IG Ltd. “It’s been very positive for markets this week, with equities responding favorably to this macro picture.”
Futures on the Standard & Poor’s 500 Index slipped 0.1 percent, with the underlying gauge up 2.9 percent in the past four days.
Carmakers were the biggest drags on Japan’s Topix index, which slid 0.5 percent on Friday. The measure is poised for a fifth straight weekly advance. South Korea’s Kospi index fluctuated, as did Australia’s S&P/ASX 200 Index. New Zealand’s S&P/NZX 50 Index rose 0.5 percent.
Futures on Hong Kong’s Hang Seng Index added 0.1 percent in most recent trading, while those on the Hang Seng China Enterprises Index rose 0.2 percent.
The U.S. benchmark gauge lost 0.1 percent Thursday, after fluctuating throughout the day, as UnitedHealth Group Inc.’s profit warning rattled the health-care sector and oil’s descent sank energy producers. Shares surged a day earlier as Fed minutes showed officials largely agreed the pace of tightening would be gradual.
The yen was at 122.89 per dollar after gaining 0.6 percent on Thursday as the central bank left monetary policy unchanged and said “inflation expectations appear to be rising.” Governor Haruhiko Kuroda, who unleashed unprecedented monetary stimulus at the Bank of Japan in 2013 and doubled down on it last year, is done expanding his efforts, according to an increasing number of economists.
Kuroda is scheduled to speak on Friday, while reports on Malaysian inflation, Taiwan’s export orders and a Chinese economic index are also due.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency versus 10 major counterparts, added 0.1 percent Friday. The greenback’s Thursday retreat saw it slide most against the currencies of resources producers including New Zealand, Brazil and Australia. Commodity currencies have tumbled this year amid a collapse in raw materials prices and on concern the first U.S. rate increase since 2006 would further dent global growth.
“Traders are pulling back from their long dollar trades for now, given speculation that the Fed’s tightening cycle may be more gradual than the market had previously priced,” said Imre Speizer, markets strategist at Westpac
Banking Corp. in Auckland. “For now, the unwinding of positions built around the Fed tightening is dominating concerns about commodity weakness. I don’t think it will last.”