Asia subdued as crude oil flounders, global woes support dollar and yen

Tokyo: Asian stocks were subdued early on Wednesday as floundering crude oil prices continued to dampen risk sentiment, while the dollar and yen drew support from anxiety over global growth and geopolitical risk stemming from Iran-Saudi tensions.

MSCI`s broadest index of Asia-Pacific shares outside Japan edged down 0.1 percent. Wall Street shares closed Tuesday on very modest gains and failed to provide Asia with much impetus.

Australian shares lost 0.7 percent and South Korea`s KOSPI dipped 0.1 percent. Japan`s Nikkei bucked the trend and rose 0.2 percent.

Risk markets are now waiting to see how Chinese equities will fare later in the session. Shanghai shares stabilised somewhat on Tuesday, following an arresting 7 percent plunge at the week`s start that spooked stocks worldwide.

Both the dollar and yen attracted bids amid the risk aversion that gripped financial markets globally from the start of 2016.

The euro stood little changed at $1.0752 after shedding 0.8 percent overnight, when it a one-month low of $1.0711.

The common currency was steady at 128.045 yen following an overnight drop of 1 percent. It dipped as far as 127.535 on Tuesday, its lowest since late April. 

Kathy Lien, managing director of FX strategy at BK Asset Management, wrote that the U.S. and Japanese currencies were being bought because "China is in trouble, U.S. data has been disappointing, Japan refuses to increase stimulus and oil prices continue to fall, but everyone`s greatest fear is that stocks have finally peaked". 

The yen had a slight edge over the greenback. The dollar traded at 119.14 after slipping 0.3 percent overnight. It had hit a 2-1/2-month low of 118.705 earlier this week.

In commodities, crude oil prices struggled near 11-year lows, with the market giving more attention to the stronger dollar and swelling U.S. inventories rather than growing tensions between Saudi Arabia and Iran.

Relations between the two major oil producers collapsed in acrimony this week after Saudi Arabia`s executed a Shi`ite cleric, setting off a storm of protests in Tehran.

U.S. crude nudged up to $36.28 a barrel but was still down 2 percent on the week and near a seven-year low of $33.98 hit late last month.

Oil-linked currencies like the Canadian dollar sank deeper on shaky crude prices.

Canada`s loonie fell to a 12-year low of C$1.402 to the dollar overnight