PBOC Will Raise Reserve Ratios for Banks Who Don't Meet Criteria

China’s central bank said some banks will be forced to lock away more reserves, a move that may contain credit growth after advances by smaller lenders jumped in January.

Some banks no longer meet criteria for preferential reserve requirement ratios and will have those levels increased, the People’s Bank of China said Friday in a statement.

Prior to the announcement, Bloomberg News reported that some lenders will face a higher ratio as officials seek to limit the risks associated with last month’s jump in credit. The PBOC said its action wasn’t driven by the speed of lending.

The central bank also said a review it carried out found that some banks which previously didn’t meet the criteria for preferential ratios now do so. Adjustments to banks’ reserve requirement ratios will be made from Feb. 25, according to the PBOC.

In 2014, the PBOC introduced preferential reserve requirement ratios for banks whose loans to the agricultural sector or to small companies exceeded certain thresholds in relation to their overall lending.

Since then, bad loans at Chinese banks have been piling up as economic growth weakened to the slowest pace in a quarter-century. PBOC data released this week that showed lending jumped to a record in January stoked concerns that financial-system risks may be increasing.

This week’s data from the central bank indicates China’s four biggest banks weren’t the driving force behind last month’s credit binge. Small- and medium-sized lenders extended a combined 1.45 trillion yuan ($222 billion) of the new loans in January, accounting for 60 percent of the total increase, the data show.

The central bank defines small and mid-sized lenders as those which had less than 2 trillion yuan of assets at the end of 2008. The four banks had set lending targets for this year that were little changed from 2015, separate people with knowledge of the matter said Friday.

The collective market share for Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. dropped to 20 percent last month from almost 40 percent in December, the figures show.

Stocks

The Asia Pacific gauge dropped 0.8 percent as of 8:10 a.m. London time, with Japan’s Topix tumbling 1.1 percent after earlier jumping more than 1 percent. The Shanghai Composite Index advanced for a second day, gaining 1.1 percent.

The Stoxx Europe 600 Index rose 0.4 percent. “Stay cautious,” said Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion.

“Don’t be afraid to reduce risk because we expect things to be volatile from here -- it’s a relatively defensive message. There are a lot of economic issues that need to be worked through. We’ve been incrementally paring back” risk positions, including equities, he said.

Australia’s S&P/ASX 200 Index declined 0.6 percent, led by a 4.2 percent slump in a gauge of energy stocks. Woodside Petroleum Ltd., the nation’s second-largest oil and natural gas producer, tumbled 6.9 percent after reporting a 99 percent collapse in full-year profit amid the rout in energy prices.

Futures on the Standard & Poor’s 500 Index retreated 0.2 percent after the benchmark capped its best two-day gain since August on Tuesday, rising 1.7 percent.

Asia Stocks Drop With Won After Yuan Fix; Treasuries Advance

Asian stocks fell with South Korea’s won and the yen strengthened after China lowered the yuan’s daily fixing by the most in six weeks. Malaysia’s ringgit slumped to a two-week low as a deal between Saudi Arabia and Russia to freeze oil production failed to assuage anxiety over this year’s crude selloff.

The MSCI Asia Pacific Index of shares dropped for the first time in three days, while the Indonesian rupiah and the won depreciated more than 0.5 percent amid speculation their central banks will bolster stimulus to help boost economic growth. European stocks opened higher, while U.S.

equity-index futures declined. American crude was below $30 a barrel after the world’s two biggest oil producers agreed to hold output near record-high levels, dashing speculation they would cut it.

Central bank attempts to calm global markets this year amid unprecedented volatility have had mixed success, with Japanese shares initially falling after the Bank of Japan announced a move into negative interest rates. Japan’s overnight call rate fell below zero for the first time in a decade, traders said.

Oil’s volatile journey in 2016 has fueled that uncertainty, amid concern over the impact on inflation. Minutes of the Federal Reserve’s most recent meeting, where officials indicated they were monitoring the turmoil in markets, are due Wednesday. Chair Janet Yellen has subsequently indicated the global ructions may delay further tightening of U.S. monetary policy.

Europe Futures Rise With Asian Stocks as Oil Jumps; Bonds Slide

European equity-index futures rose and Asian stocks headed for the biggest two-day gain in four years, extending a global rally in riskier assets on speculation that governments will act to boost economic growth and shore up the oil market.

Chinese shares led the advance in Asia after data showed a record surge in new credit last month, fueling bets that state-run banks will step up lending to revive the world’s second-largest economy. 

Futures on the Euro Stoxx 50 Index and Standard & Poor’s 500 Index both climbed at least 0.2 percent, while U.S. Treasuries fell as trading resumed after a holiday on Monday. Crude futures jumped as much as 4.6 percent in London after Saudi Arabia’s oil minister was said to plan a meeting with his Russian counterpart in Doha.

The 43 percent tumble in crude over the past year has restrained growth in oil-rich emerging countries and heightened sensitivity to any sign of willingness by Saudi Arabia, the de facto OPEC leader, to discuss coordinated production cuts. 

China’s lending data followed an expression of confidence in the economy from central bank Governor Zhou Xiaochuan over the weekend and reassurances from European Central Bank President Mario Draghi on Monday that policy makers will act should financial turmoil threaten price stability.

“Central banks will try to calm the markets down a little bit, and then investors will start to step back in,” said Sean Fenton, a Sydney-based money manager at Tribeca Investment Partners. “There’s enough value starting to emerge in certain areas that investors will eventually take advantage of that.”

Japan’s Topix Soars Toward Biggest Gain Since 2008

Stocks soared in Tokyo, with the Topix posting its biggest gain in more than seven years, as investors judged shares had been oversold and a report showing Japan’s economy shrank more than expected last quarter boosted the outlook for central bank stimulus.

The Topix surged 8 percent to 1,292.23 at the close in Tokyo, its best gain since October 2008, after plunging 13 percent last week. The Nikkei 225 Stock Average jumped 7.2 percent to 16,022.58 as the yen weakened for a second day.

 U.S. markets rebounded on Friday to halt the longest losing streak since September. Chinese mainland markets reopen Monday after a week long holiday during which global stocks fell into a bear market.

The Topix’s 14-day relative strength index fell to 26.49 on Friday, below the level of 30 which some traders say indicates that shares will rise.

A report Monday showed Japan’s economy shrank 1.4 percent in the fourth quarter on an annualized basis, more than economists’ forecast for a 0.8 percent contraction.

All of the 33 Topix industry groups rose, led by insurers, tire makers and brokerages. Megabank Mitsubishi UFJ Financial Group Inc., which had fallen 41 percent this year through Friday, jumped 8.7 percent.

Toyota Motor Corp., the world’s biggest carmaker, added 9.6 percent as the yen weakened against the dollar. Online retailer Rakuten Inc. tumbled 1.3 percent after reporting full-year profit slumped 37 percent.

Asia Stocks Rebound as U.S., Europe Futures Gain; Yen, Gold Fall

Asian shares rebounded from a three-year low, led by a surge in Japanese shares, amid speculation losses that pushed global equities into a bear market were excessive. U.S. and European stock futures rallied as China’s yuan jumped by the most since a dollar peg was scrapped in 2005.

The MSCI Asia Pacific Index was headed for its biggest gain since April 2009 and Japan’s Topix soared 8 percent.The Shanghai Composite Index declined as trading resumed after the week-long Lunar New Year holiday, while the yuan climbed to its strongest level of the year as China reported a record trade surplus.

U.S. crude slipped to about $29 a barrel, after a 12 percent surge on Friday that burnished investor sentiment. The yen retreated with gold as haven assets fell out of favor.An MSCI gauge of global equities capped a 20 percent slide from a May record last week as the Federal Reserve acknowledged the volatility around the world and signaled it may delay further monetary tightening.

China’s central bank stepped up efforts to restore stability to the nation’s currency and economy, with Governor Zhou Xiaochuan saying there’s no basis for continued yuan depreciation. After sinking for six straight days on glut concerns, crude futures jumped by the most in seven years on Friday as the Standard & Poor’s 500 Index rebounded on stronger-than-expected U.S. retail sales data.

An 11 percent drop in China’s exports in January was eclipsed by an even bigger tumble in imports, leaving a record $63.3 billion trade surplus for the world’s biggest trading nation, a report showed on Monday.

Japan announced a bigger-than-expected decline in fourth-quarter gross domestic product, spurring speculation the central bank will boost stimulus. Financial markets in the U.S. and Canada will be closed Monday for holidays.

Bear Market Descends on Global Stocks

The yearlong decline in global equities that started with a selloff in energy became a full-blown bear market Thursday as a rout in bank shares extended losses in the broadest worldwide gauge past 20 percent.

The MSCI All-Country World Index slipped 1.3 percent, pushing its decline since May to 20 percent and marking the biggest retreat from risk since Europe’s sovereign debt crisis in 2011.

Every industry has fallen since last year’s record high with decreases exceeding 25 percent in financial stocks and 30 percent in energy and commodities.

Selling from Tokyo to Frankfurt and New York is torpedoing one of the biggest expansions in share prices of the last century, particularly in the U.S. where the Nasdaq Composite Index has fallen 18 percent since July and the Standard & Poor’s 500 Index is about 125 points from its own bear market.

Investors are running for cover amid concern the rout in oil prices will destabilize credit markets and saddle banks with losses.

Only once in seven years have global stocks teetered as precariously as they are now. The MSCI gauge fell more than 24 percent between May and October of 2011 as Europe sovereign crisis raged and S&P stripped the U.S. of its AAA credit rating.

The latest decline trims an advance that from March 2009 to its height last May added about $47 trillion to equity values globally.

Equities markets have been buffeted by everything from China’s slowdown to the selloff in oil and rising U.S. interest rates, sending them to the worst start to a year on record. The rout in the oil industry is rippling through financial markets amid growing signs that credit quality is worsening.

U.S. bonds are now indicating the slowest inflation since May 2009 as investors pile into haven assets. In a departure from past bouts of global weakness, global markets this year are getting little help from the U.S.

The world’s biggest economy was sluggish enough to keep Janet Yellen’s Fed from hiking rates until December, and now corporate earnings are eroding. The spread between an index tracking global stocks outside the U.S. and the MSCI All-Country index is now the smallest since Aug 2015.

Investors dump stocks, seek safe havens as bank fears flare

Asian share markets were scorched on Tuesday as stability concerns put a torch to European bank stocks and sent investors stampeding to only the safest of safe-haven assets.

Japanese Finance Minister Taro Aso

As fear overwhelmed greed, yields on longer-term Japanese bonds fell below zero for the first time, the yen surged to a 15-month peak and gold reached its most precious since June.

Japanese Finance Minister Taro Aso felt moved enough to warn the yen's rise was "rough", something of an understatement as the Nikkei .N225 nosedived 5.4 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.2 percent, with Australian shares hitting 2-1/2-year closing low, and would have been lower if not for holidays in many centres.

Spread-betters see another weak session in European shares, where German DAX .GDAX is seen falling 0.7 percent and Britain's FTSE .FTSE 0.5 percent.

S&P 500 e-mini futures ESc1 fell more than 1 percent at one point. All of which magnified the stakes for U.S. Federal Reserve Chair Janet Yellen's testimony this week.

Wall Street pared losses but still ended deep in the red. The Dow .DJI lost 1.1 percent, while the S&P 500 .SPX fell 1.42 percent and the Nasdaq .IXIC 1.82 percent. 

The rout began in Europe on Monday, when the FTSEurofirst 300 .FTEU3 index shed 3.4 percent to its lowest since late 2013, led by a near 6 percent dive in the banking sector .SX7P.

Deutsche Bank (DBKGn.DE) alone sank 9.5 percent as concerns mounted about its ability to maintain bond payments. Late Monday, the German bank said it has "sufficient" reserves to make due payments this year on AT1 securities.

Dollar Heads for Worst Week Since 2009 on Fed; Japan Bonds Rally

The dollar headed for its worst week since 2009 as traders boosted bets the Federal Reserve will keep interest rates on hold this year. Demand for government debt sent Japan’s 10-year bond yields to a record low.

Asia’s regional stock gauge resumed its decline, led by Japanese shares, as the yen headed for its biggest weekly gain in more than six years.

European and U.S. stock futures both declined. Japan’s 10-year yields extended a slide toward zero, fueled by the central bank’s move to negative interest rates. The Bloomberg Dollar Spot Index has fallen 2.4 percent this week as economists forecast U.S.

government data on Friday will show jobs growth in January was the weakest since September.
Patchy U.S. data ignited the dollar’s retreat this week, while concern the American economy is vulnerable to global headwinds fueled the declines.

The fixed-income market is pricing in no Fed rate hikes this year, as central banks from Asia to Europe have mixed success trying to quell the turmoil that’s roiled markets in 2016.

While a weaker dollar makes commodities more appealing in other currencies, oil is heading for its first weekly loss since mid-January as U.S. inventories rise to a record.

“Expectations are growing by the day that the Fed will not hike again this year given the weaker growth picture and tightening financial conditions,” Jason Wong, a currency strategist in Wellington at Bank of New Zealand Ltd., wrote in an e-mail to clients.

“The key release is U.S. employment data overnight, which is expected to show some payback in employment growth in January.”

European Index Futures Rally With Asian Stocks as Crude Advances

European stock-index futures climbed with Asian stocks as a selloff in the dollar underpinned a resurgence in crude oil.

A gauge of Asian shares rose for the first time in three days, led by mining and energy companies, while U.S. index futures advanced.

The euro weakened 0.2 percent after surging 1.7 percent on Wednesday, when the dollar tumbled against a basket of currencies. South Korea’s won rallied the most in three months. U.S. oil extended gains above $32 a barrel after jumping 8 percent in the previous session.

"The selloff in the U.S. dollar is supportive of commodities,” said Scott Schuberg, chief executive officer at Rivkin Securities, a brokerage in Sydney.

The dollar’s retreat was sparked by data showing the U.S. services sector grew at the slowest pace in nearly two years, underscoring the vulnerability of the American economy to unsteadiness abroad.

The report tipped the fixed-income market’s balance closer toward zero rate hikes by the Federal Reserve this year, amid prospects central banks from Asia to Europe will act to quell the turmoil that’s roiled markets in 2016.

The greenback’s drop helped boost the price of crude oil, along with speculation OPEC and other oil producing nations have agreed to an emergency meeting on market volatility.

China set a range for its economic growth target for the first time in 20 years, saying late Wednesday that the economy would likely expand 6.5 percent to 7 percent this year, slower than last year’s goal of about 7 percent.

Gyrations in Chinese equity and currency markets unsettled global trading at the start of the year, with regulators’ response to the volatility fueling anxiety over their ability to manage the slowing economy.

Credit Suisse Group AG swung to a loss in the fourth quarter as it wrote off billions of dollars in goodwill, set aside provisions for litigation and booked a multi-billion-dollar loss in its main trading unit.

The bank gave up 5.83 billion Swiss francs ($5.8 billion), including a 3.8 billion-franc impairment that exacerbated its quarterly loss.

Yen Advances on Asia Stock Losses as Aussie Weakens After RBA

The yen strengthened for a second day while the Australian and New Zealand dollars weakened as a regional stock market slump boosted demand for safer assets.

The Aussie dropped for the first time in six days after the Reserve Bank of Australia kept interest rates at a record low and said it will weigh the impact of recent global financial turbulence in deciding whether to ease policy further. 

Asian equities fell, halting a four-day gain, while oil declined amid fading optimism sparked by last week’s surprise Bank of Japan expansion of stimulus.

“The safe-haven yen has strengthened and globally linked currencies such as the Australian dollar and New Zealand dollar have declined as regional equity markets fall,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “The RBA appears a little more cautious on the global economy.”

The yen strengthened 0.3 percent to 120.65 per dollar as of 6:48 a.m. in London after appreciating 0.1 percent on Monday. Japan’s currency rose 0.2 percent to 131.52 per euro. The shared currency climbed 0.1 percent to $1.0900.

“The BOJ has made it difficult to buy the yen, but people are also calming down” after the central bank announced negative interest rates last week, said Jun Kato, a senior fund manager in Tokyo at Shinkin Asset Management.

China Stocks Drop With European Equity Futures; Crude Oil Falls

China’s stocks fell as concern slumping commodity prices and a weakening economy will reduce profits overshadowed the biggest cash injection into financial markets in three years. 

European stock index futures fell and oil led a retreat in raw materials, while South Korea’s won weakened.

The Shanghai Composite Index fell 2.9 percent and contracts on the Euro Stoxx 50 Index retreated 0.4 percent while Japanese shares declined as the nation’s central bank started a two-day meeting. Facebook Inc.’s after-market bounce spurred gains in futures on the Nasdaq 100 Index. 

U.S. crude snapped a two-day advance as American stockpiles data reinforced concern a global glut is worsening. Malaysia’s ringgit rose to a seven-week high after Prime Minister Najib Razak maintained his fiscal-deficit target.

With 2016 proving to be one of the most volatile starts to a year on record for financial markets, the Fed’s first statement since its December interest-rate hike noted officials were “closely monitoring” developments from China to Europe, for any adverse impact on the U.S. economy. 

China’s policy makers injected more cash into its financial system to keep borrowing costs from rising as they contend with the slowest economic growth in a quarter century and record capital outflows that drove the yuan to a five-year low this month.

Asian stocks struggle as oil falters, China weakens

Asian stocks held near the day's lows on Wednesday as a relapse in oil prices and fresh drops in Chinese stocks made sentiment even more fragile before a U.S. Federal Reserve policy statement due later.

European shares are expected to have a mixed start. Spreadbetters are expecting Britain's FTSE and France's CAC 40 to to open flat to slightly higher and Germany's DAX to open broadly unchanged.

Technology giant Apple Inc's forecast of its first revenue drop in 13 years signalled a risk of diminishing corporate profitability and more downgrades.

MSCI's broadest index of Asia-Pacific shares outside Japan was near the day's lows with meagre gains of 0.2 percent. Australian shares dropped 1.2 percent.

With Chinese stocks falling more than 3 percent after a 6.4 percent tumble in the previous session, Asia failed to draw much support from an overnight bounce on Wall Street led by upbeat earnings results and a bounce in crude oil. U.S. stock futures were pointing to a weaker start.

Benchmark indexes fell sharply on Wednesday taking losses over two sessions to nearly 10 percent with both the mainland and the Hong Kong stock markets worst performers globally.

Valuations had taken quite a beating. The benchmark Hong Kong stock market index was trading at a price to earnings multiple of 7.4 times, a post 2008 crisis low while the China enterprises index was being quoted at a multiple of less than 6 times, its cheapest since December 2001.

"The Hang Seng China Enterprises index is currently priced for a credit event which we think is slightly extreme," said Michelle Leung, CEO of Xingtai Capital Management, a hedge fund focused on Chinese consumer stocks. 

Asia rises after cold spell lifts oil, dollar stands tall

Asian stocks on Monday moved further away from four-year lows struck last week, as a cold spell in parts of the northern hemisphere pushed oil prices higher and relieved some of the bearish pressure on global markets.

World equities also took heart from the European Central Bank last week signalling additional monetary easing steps to come, raising hopes that other central banks, like the Bank of Japan, would take the same path.

Spreadbetters forecast a higher open for Britain's FTSE, Germany's DAX and France's CAC against the positive backdrop for equities.

The dollar stood tall, notably against the safe-haven yen, as risk aversion eased slightly for now and pushed U.S. Treasury yields higher.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.5 percent, putting further distance between a four-year low plumbed last week.

Shanghai stocks added 1 percent and Tokyo's Nikkei, which slumped to a one-year low last week, rose 1.2 percent. Australian shares advanced 1.8 percent to a two-week peak.

On Friday, the S&P 500 rose 2 percent and the Dow added 1.3 percent Friday as a cold snap in North America and Europe caused a rally in oil prices. The S&P energy sector surged 4.3 percent.

Both the Federal Reserve and Bank of Japan hold policy meetings this week, with the Fed meeting on Jan. 26-27 and the BOJ gathering immediately after, on Jan. 28-29.

Investors will look for any hints of when the Fed intends to make a second interest rate hike, while there is speculation that the BOJ could opt to take additional easing measures.

Asia stocks lows, helped by ECB, oil bounce

The euro slipped 0.4 percent to $1.0832 EUR=. The common currency fell to an eight-month low of $1.0523 in December but has appreciated significantly because the ECB's easing decision that month fell far short of expectations.

The dollar was up 0.3 percent at 118.03 yen JPY=, pulling away from a one-year trough of 115.97 struck earlier this week against the safe-haven Japanese currency.

The Chinese yuan remained relatively steady against the dollar as efforts by local authorities to quell speculation of a sharp depreciation appeared to work for now.

Onshore spot yuan CNY=CFXS stood little changed at 6.5794 to the dollar, corralled in a narrow 6.5837-6.5768 band so far this week.

After guiding the yuan sharply lower and pushing onshore spot rates to a five-year low earlier this month, the People's Bank of China (PBOC) has helped the currency steady by setting a succession of midpoints within a tight range.

Authorities have also introduced steps to discourage speculators from shorting the yuan.

U.S. crude oil CLc1 extended an overnight rally made after data showed stockpiles at some U.S. sites did not grow as much as forecast, providing participants in the battered market with an incentive to cover short positions.

The contracts were up 1.2 percent at $30.71 a barrel. U.S. crude fell to its lowest levels since 2003 earlier this week as the prospect of Iranian oil - following the lifting of international sanctions on Tehran - flooding a heavily saturated market dragged down prices.

Asia stocks end week rallying off four-year lows

Asian stocks bounced at the end of a tumultuous week, recovering from four-year lows thanks to hints of more monetary policy support by the European Central Bank and a rally in crude oil from 12-year lows.

European markets could follow, with financial spreadbetters expecting Britain's FTSE 100.FTSE to open up about 0.4 percent, Germany's DAX .GDAXI to start the day as much as 0.9 percent higher, and France's CAC 40 .FCHI to be up as much as 0.8 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 2.6 percent, the most since Sept. 9, after probing a four-year low on Thursday.

That puts the index on track for a 0.2 percent gain for a week in which oil prices plunged and China-led global growth concerns pummelled risk assets globally.

Japan's Nikkei .N225 surged 5.9 percent at the close, the most in more than four months, moving away from a 15-month low struck Thursday. 

It was boosted by speculation that the Bank of Japan would opt for additional stimulus at its Jan. 28-29 policy meeting. The rally shrank losses for the week to 1.1 percent.

Asian stocks bounced at the end of a tumultuous week, recovering from four-year lows thanks to hints of more monetary policy support by the European Central Bank and a rally in crude oil from 12-year lows.

European markets could follow, with financial spreadbetters expecting Britain's FTSE 100.FTSE to open up about 0.4 percent, Germany's DAX .GDAXI to start the day as much as 0.9 percent higher, and France's CAC 40 .FCHI to be up as much as 0.8 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 2.6 percent, the most since Sept. 9, after probing a four-year low on Thursday.

That puts the index on track for a 0.2 percent gain for a week in which oil prices plunged and China-led global growth concerns pummelled risk assets globally.

Japan's Nikkei .N225 surged 5.9 percent at the close, the most in more than four months, moving away from a 15-month low struck Thursday. 

Asia stocks get welcome respite as crude prices bounce

Battered crude oil prices bounced back from their lows on Thursday, propelling solid gains in Asian shares and the dollar.

Thursday's gains built on Wall Street's consolidation overnight in which major indexes finished with declines of more than 1 percent, but well off the 3 percent plus they plumbed in the previous session when U.S. crude had dropped to 2003 lows.

New front-month U.S. March oil futures fell nearly 4 percent on the day to close at $28.35 a barrel, but they were up 1.2 percent in Asian trade at $28.70, a far cry from the expiring contract on U.S. crude for February delivery, which slid 6.7 percent to settle at $26.55.

MSCI's broadest index of Asia-Pacific shares outside Japan extended early gains and was up 1.4 percent while Japan's Nikkei average added 1.5 percent, clawing back some of the 3.7 percent it plunged in the previous session to a 14-1/2 month closing low.

China's bluechip CSI300 index was down 0.5 percent in early trade, and the Shanghai Composite Index slipped 0.8 percent.

The dollar bounced back from a one-year low against its perceived safe-haven Japanese counterpart. The greenback added about 0.4 percent to 117.38 yen after falling as low as 115.97 on Wednesday, even as it marked impressive gains against some emerging market currencies.

U.S. data out on Wednesday undermined the dollar overnight. U.S. consumer prices unexpectedly fell in December, suggesting inflation was more sluggish than the U.S. Federal Reserve believed.

Other Wednesday data showed a drop in housing starts and building permits last month, which led investors to pare expectations of further interest rate hikes this year.

The euro edged down about 0.2 percent to $1.0870, ahead of the European Central Bank's regular policy meeting later in the session. Expectations are for the ECB to hold interest rates steady but highlight increasing risks to growth and inflation while keeping the door open for further easing steps later this year.

Asian stocks slide to four-year lows as oil spirals lower

Asian stock markets slumped to fresh four-year lows on Wednesday as a relentless slide in oil prices snuffed out an attempted rally on Wall Street and dealt a further blow to global investors' appetite for riskier assets.

European stocks were expected to fall sharply at the open on Wednesday with financial spreadbetters predicting Britain's FTSE 100 .FTSE to open down 2 percent, Germany's DAX .DAXI to fall 2.4 percent and France's CAC .FCHI to slip 2.2-2.4 percent.

U.S. crude wallowed at its lowest since 2003 after the world's energy watchdog warned the market could "drown in oversupply". U.S. futures CLc1 shed nearly 3 percent to $27.68 while Brent crude LCOc1 lost 2 percent to $28.21 a barrel.

In Asia, stocks surrendered all of Tuesday's rare gains with the MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS falling 2.6 percent on the day and hitting its lowest since October 2011.

Leading regional stocks lower was the Hong Kong stock market .HSI with the benchmark index falling 3.7 percent on the day, its single biggest daily fall since early August, with all of its 50 constituents in the red.

Japan's Nikkei .N225 closed down 3.7 percent, leaving it 20 percent below last year's peak, meeting the technical definition of a bear market. The pain was felt widely with Australian stocks down 1.3 percent and South Korea .KS11 off 2.3 percent.

Chinese markets fared only marginally better than regional counterparts amid mounting talk that more stimulus may be on the way, possibly before the Lunar New Year holidays in early February.
December factory output, investment and retail sales data released on Tuesday were all weaker than expected.

The CSI300 index .CSI300 fell 1.3 percent, after rallying more than 3 percent on Tuesday. The Shanghai Composite Index .SSEC eased 0.9 percent.

The government-backed China Securities Journal reported that Beijing had the policy space for further easing to support the economy, including raising deficit spending to around 3 percent of annual economic output.

China's central bank late Tuesday revealed it would inject more than 600 billion yuan ($91.22 billion) into the banking system to help ease a liquidity squeeze expected before the long Lunar New Year celebrations.

Asian shares drop to 2011 levels as oil slump intensifies

Asian shares slid to their lowest levels since 2011 on Monday after weak U.S. economic data and a massive fall in oil prices stoked further worries about a global economic downturn.

Spreadbetters expected a subdued open for European shares, forecasting London's FTSE.FTSE to open modestly higher while seeing Germany's DAX .GDAXI and France's CAC.FCHI to start flat-to-slightly-weaker.

Crude prices faced fresh pressure after international sanctions against Iran were lifted over the weekend, allowing Tehran to return to an already over-supplied oil market. Brent oil futures LCOc1 fell below $28 per barrel LCOc1, touching their lowest level since 2003.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell to its lowest since October 2011 and was last down 0.5 percent.

Japan's Nikkei .N225 tumbled as much as 2.8 percent to a one-year low. It has lost 20 percent from its peak hit in June, meeting a common definition of a bear market.On Wall Street, S&P 500 .SPX hit a 15-month low on Friday, ahead of Monday's market holiday.

The Chinese yuan rose 0.6 percent CNH= in the offshore trade to 6.5808 to the dollar, however, as Chinese authorities continued to stamp down speculative yuan selling.

China will start implementing a reserve requirement ratio (RRR) on some banks involved in the offshore yuan market, the People's Bank of China (PBOC) said on Monday, in what appears to be its latest attempt to stem speculation in the currency.

Asia shares hit 3-1/2-year lows as oil resumes fall

Asian stocks surrendered earlier gains to hit 3-1/2-year lows on Friday as renewed pressure on oil prices and disappointing Chinese data kept investors on edge.

MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.3 percent to the lowest level since June 2012, and was on track for a loss of 2.7 percent for the week.

Japan's Nikkei rose 0.7 percent, but was set for a weekly loss of 1.9 percent.

Oil prices rebounded on Thursday, with international benchmark Brent futures rising 2.4 percent to $31.03 a barrel, recovering from its 12-year low of $29.73 hit earlier in the day.

But that rally, largely driven by short-covering after a 20 percent fall since the start of year, proved to be shortlived.

The collapse in oil prices has spooked financial markets as investors worried about the health of the global economy, with a slowdown in China and volatility in its markets making for a nervous start to the year.

"Furthermore, oil prices were under pressure once again, constraining any relief rally in energy and material stocks."Brent crude opened weaker on Friday and lost 0.6 percent to $30.69.

U.S. crude fared even worse, slumping 1.8 percent to $30.63 as the prospect of additional Iranian supply looms over the market. It had posted the first significant gains for 2016 in the previous session.

Stocks in China also returned to negative territory after a brief rebound in late trading on Thursday.