* Investment flows into Asia positive for first week of year
* Dollar gains on positive payrolls data
* China currency gains after strong fixing
By Saikat Chatterjee
HONG KONG, Jan 9 Asian stocks cut early gains as
investor caution grew before a news conference by
President-elect Donald Trump on Wednesday, where his views on
global trade and China will be carefully scrutinised for future
The dollar stood tall against rivals on Monday after the
latest U.S. payrolls data indicated strong underlying wage
growth, strengthening the case for more rate increases in 2017.
MSCI's ex-Japan Asia-Pacific shares index
was flat on the day, having risen as much as 0.5 percent after
posting a rare loss in the previous session. Australia's
S&P/ASX200 rose 0.9 percent while Hong Kong shares
rose 0.2 percent.
Trading was light because Japan is shut for a holiday.
The caution in Asia is expected to ripple into European
markets with futures pointing to a cautious start for various
"The dollar's rising strength will be a growing concern for
Asian markets, particularly Hong Kong, and investors will be
waiting for Trump's comments to get some clues on what areas the
new administration will focus on," said Alex Wong, a portfolio
manager at Hong Kong-based Ample Capital.
Foreign investors will be wary of buying Hong Kong assets as
the currency is pegged to the U.S. dollar, while the domestic
business environment, particularly for retailers, will suffer
more as residents up spending abroad.
Notwithstanding the growing worries around Trump's stance
on trade with emerging markets, 2017 has begun on a positive
note in terms of capital flows for Asian markets, helped by an
extended rally in U.S. equities.
Combined investment flows into Asia were positive at nearly
$600 million for the week ending 4th January, reversing outflows
posted for the previous week, data compiled by Nomura analysts
U.S. stocks ended at record highs, fuelled by optimism over
Trump's plans to stimulate the economy with lower taxes and
increased infrastructure spending. Both the Nasdaq and
the S&P 500 ended at record highs.
But with markets perched at record highs and valuations at
the upper end of historical trading ranges, particularly in the
United States, market analysts are keenly aware that even a
small disappointment from Trump's policy proposals could trigger
a massive wave of profit-taking.
In currencies, the dollar started the week on a firm note
after Friday's data showed a rebound in U.S. wages, pointing to
sustained labour market momentum and more rate increases by the
U.S. Federal Reserve.
"With expectations of more rate hikes on the horizon, we
believe the dollar will resume its upward trend versus emerging
market Asia currencies in the coming weeks," Gao Qi, an FX
strategist at ScotiaBank in Singapore, wrote in a client note.
The dollar was trading at 117.47 yen, nearly 2
percent above Friday's lows of around 115. It was steady at
102.40 against a basket of currencies
China's yuan gained on Monday after Beijing's
daily official fixing was stronger than market expectations and
following weekend news that foreign exchange reserves fell to
near six-year lows as authorities stepped up their intervention
to protect the currency.
Bonds were stung by the strong U.S. data, with both two-year
and 10-year U.S. Treasury yields inching higher as market
participants eyed the probability of more rate hikes in 2017.
The yield on two-year U.S. Treasury notes was
perched at 1.21 percent, off Thursday's low of 1.17 percent.
Oil prices edged lower, thanks to a stronger dollar and
growing concern whether OPEC producers would stick to an
agreement to cut output. Brent crude futures were down
0.3 percent in early trade.
(Editing by Eric Meijer)