Tokyo: Asian shares stepped back on Friday and major currencies mostly stuck to late US levels as investors caught their breath, after Switzerland`s unexpected move to abandon its currency cap jolted markets already roiled by plunging commodities prices.
The euro suffered its biggest one-day drop against the Swiss franc in history and skidded to an 11-year low against the US dollar after the Swiss National Bank (SNB) suddenly ditched its commitment to keep its franc above 1.20 per euro.
Investors took this as a sign that the European Central Bank would launch large-scale bond buying next week, as many had already expected.
"Volatility has been on the rise since the beginning of the year and the SNB`s announcement adds to the growing list of developments that could trigger greater volatility in the financial markets," Kathy Lien, managing director at BK Asset Management in New York, said in a note, citing the ECB`s Jan. 22 rate decision as well as Greek elections in the first quarter of the year.
MSCI`s broadest index of Asia-Pacific shares outside Japan edged down about 0.1 percent in early trade. But Japan`s Nikkei stock average slumped 2 percent as a resurgent yen touched a fresh one-month low on its safe-haven appeal.
On Wall Street overnight, stocks closed lower, marking a fifth straight session of losses as investors digested the SNB`s move, disappointing bank results and the potential impact of global economic weakness on U.S. corporate earnings.
The Swiss currency surged as much as 30 percent to a high of 0.8500 franc per euro after the SNB`s announcement. The European unit was last up 0.3 percent on the day at 0.9945 francs.
Against the dollar, the euro was flat on the day at $1.1635 after falling as low as $1.15675 on Thursday, a nadir not seen since November 2003.
The greenback touched a fresh one-month low of 115.90 yen in early Asian trade, and was last steady on the day at 116.14 yen.
Further undermining the dollar`s attractiveness, US Treasury yields fell as investors sought the safety of fixed-income assets, with the 30-year yield touching fresh all-time lows and the benchmark 10-year yield wallowing at nearly two-year lows. The 10-year yield edged down to 1.722 percent in Asia, from its U.S. close of 1.775 percent on Thursday.
Spot gold was up about 2 percent at $1,263.11 an ounce after spiking as much as 3 percent to a four-month high after the Swiss move.
