Yen, bonds, gold all gain at dollar’s expense

Fresh cracks appeared in global markets on Thursday as investors sought the safety of Japanese yen, gold and top-rated bonds while dumping U.S. dollars on bets the Federal Reserve could be done raising interest rates.

Even the absence of Tokyo for a holiday could not stop the dollar from hitting a 15-month low on the yen, and gold finally broke major chart resistance to reach its highest since May.

Insatiable demand for U.S. Treasuries drove longer-term yields to one-year lows and flattened the yield curve in a way that has presaged economic recession in the past.

“In some ways it is reminiscent of 2008 with tightening credit markets, bank shares under pressure and worries central banks are powerless,” said Shane Oliver, head of investment strategy at AMP Capital, though he suspects markets are overly pessimistic this time.

The flight from risk told on most Asian shares, with Hong Kong – a favourite channel for global investors to play China – diving 3.9 percent as investors there returned from the long Lunar New year holidays. Mainland China markets are closed all week.

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.4 percent, and South Korea resumed with a 2.9 percent drop.

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