Asian stocks head for record quarter as dollar pushes yen to 40-year low

SINGAPORE: Asian stocks were set to close a record-breaking quarter on Tuesday, led by gains in Japan, South Korea and Taiwan, while a stronger dollar pushed the yen to a 40-year low and weighed on gold.

Japan’s Nikkei was steady in early trade and remained on course for a quarterly gain of more than 36%, its largest on record. South Korea’s KOSPI slipped 1%, but was still set to rise nearly 65% in the second quarter after more than doubling so far this year.

Taiwan’s benchmark index was also headed for a quarterly gain of more than 40%, supported by strong demand for semiconductor stocks.

The rally in Asia’s chip-heavy markets came despite foreign selling. According to BNY, net outflows from South Korean equities have reached $17.3 billion so far this year, as investors took profits and rebalanced portfolios after sharp gains.

Hong Kong’s Hang Seng lagged behind regional markets, trading mostly flat on Tuesday and heading for a 7.5% decline for the quarter.

Oil prices eased back to pre-war levels as concerns over conflict-related supply disruptions faded. Brent crude futures stood at $72.49 a barrel, even as the interim ceasefire remained under pressure.

Wall Street indexes closed higher overnight, while US futures were little changed in Asian trading.

The dollar was heading for a fourth consecutive quarterly gain after markets sharply revised expectations for US interest rates from cuts to potential hikes, citing stronger economic data and inflation pressures.

The dollar index was up 1.3% for the quarter. The yen fell to 162.41 per dollar in Asian trade, its weakest level in four decades, raising expectations that Japanese authorities could intervene. Japan’s Finance Minister Satsuki Katayama said authorities were ready to respond appropriately at any time.

The stronger dollar has also hit gold, which was heading for its biggest quarterly fall in more than 10 years.

Investors are now looking ahead to US jobs data due on Thursday, a day earlier than usual because of Friday’s holiday, and a Wednesday appearance by Federal Reserve Chair Kevin Warsh.

In China, manufacturing activity expanded in June, supported by high-tech exports. European inflation figures, US consumer confidence data and US job openings are also due later in the session.

Outside Asia, Europe’s STOXX index was on track for a quarterly gain of 9%, while China’s mainland blue-chip CSI300 was up about 10% for the quarter, drawing investor attention as some funds looked beyond technology-heavy markets for broader portfolio diversification.