Shares in Asia mostly down, but Tokyo up as yen weakens

Shares in Asia mostly down, but Tokyo up as yen weakens  | Apr 08, 2016 12:30AM ET

Asian shares mostly lower - Asian shares were mostly lower with Tokyo bucking the trend as the yen weakened a bit after recent sharp gains and investors parsed the latest remarks from Fed chair Janet Yellen.

The S&P/ASX 200 dropped 0.47% and the Nikkei 225 edged up 0.56%.

The benchmark Shanghai Composite Index was last down 0.91%, while Hong Kong's Hang Seng index was last off 0.73%.

The yuan fell against the dollar Friday after the People's Bank of China set a weaker fixing at 6.4733 compared with 6.4707.

Overnight, U.S. stocks suffered their worst single session in six weeks on Thursday, amid heightened fears of an impending global economic slowdown, as a surge in the Japanese yen against the dollar dragged down banking stocks and major indices worldwide.

The dollar crashed more than 1.5% versus the yen, suffering its fifth straight daily loss, to hit a fresh 17-month low at 107.69. It came as investors expressed concerns that the Bank of Japan's current negative interest rate regime might not be enough to prevent one of the world's largest economies from entering an extended period of deflation.

Meanwhile, investors which borrowed cheaply in the yen months ago while capitalizing on the carry trade incurred sharp losses on Thursday. Under the strategy, the investors borrowed yen at a deep discount, then invested the proceeds in stocks and bonds in the U.S. and the euro zone in an effort to capitalize on higher yields. The strategy is effective when the currencies remain constant, but can lead to significant losses when the dollar falls sharply in relative value against the yen. When the yen reverses, investors are forced to close out their positions leading to further losses.

The Dow Jones Industrial Average plunged 174.09 or 0.98% to 17,541.96, falling as much as 223 points at session lows. The NASDAQ Composite index lost 72.35 or 1.47% to 4,848.37, as pharmaceutical stocks retreated from a significant rally earlier this week, while the S&P 500 Composite index crashed 24.75 or 1.20% to 2,041.91.

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