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    Asian Session – Oil slump drags equities lower; yen see-saws on mixed BoJ signals

    Shares in Asia were unable to hold on to earlier gains and fell sharply towards the close as oil headed back down again. Tokyo’s Nikkei 225 index closed down 2.4% and the Shanghai Composite index lost 3.2%. On Wednesday, US shares rallied towards the end of the session but still ended the day lower, with the S&P 500 index closing down by 1.2%.

    US crude futures hit a fresh 2003 low of $26.19 a barrel yesterday but had recovered to $28.10 in today’s Asian session. But Brent crude extended its losses today to slide to $27.64 a barrel.

    The Japanese yen fell at the start of Asian session on reports that an aide to the Japanese Prime Minister called on the Bank of Japan to further ease monetary policy at its next meeting. The US dollar peaked at 117.47 yen in early trading but later slipped down to 116.62 yen after comments by Bank of Japan Governor Haruhiko Kuroda dampened such expectations. Kuroda said that the Bank of Japan is not considering negative interest rates but has the sufficient tools to adjust monetary policy if necessary.

    Meanwhile, the People’s Bank of China took steps to pump liquidity into China’s banking system by injecting 400 billion yuan through reverse repurchase operations. The move is part of a 600 billion yuan cash injection by the central bank ahead of the lunar New Year holidays. The yuan was steady in Thursday’s trading with the midpoint set at 6.5585 per dollar.

    Asian currencies drifted lower in late session as the mood turned risk-off. The aussie was down at 0.6890 against the greenback, while the kiwi eased to 0.6426.

    The dollar was broadly weaker following worse-than-expected inflation data on Wednesday.

    In Europe, the euro was firmer against the dollar at 1.0899 dollars, coming off lows of 1.0866 dollars earlier in Asian session. The single currency is likely to remain in a tight range ahead of today’s policy meeting by the European Central Bank.

    The pound continued to test the 1.42 level but had fallen back to 1.4166 dollars in late Asian trading. Yesterday’s better-than-expected jobs data did little to change the bearish sentiment for the currency.

    Looking ahead to the rest of the day, all eyes will be on Mario Draghi’s press conference for any clues about the prospects of further easing by the ECB. Initial weekly jobless claims in the US will also be eyed.

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