Yen Falls, Asian Stocks Surge

Stocks in Asia are higher on Tuesday as strong U.S. manufacturing data sends the yen slumping against the dollar. The stock surge was led by Japanese equities.

Also, the British pound dropped 0.6 percent at $1.2770 versus the dollar in Asian trade, the lowest level it hit in more than three decades.

The sterling started to roil following U.K. Prime Minister Theresa May’s announcement on Sunday that she would push through with Article 50 by end of March next year. This then gets the clock ticking for the two-year deadline for Britain to sever its ties with the European Union. Brexit negotiations are expected to cause “some turbulence” to the economy, according to U.K. Treasury chief Philip Hammond on Monday.

The Nikkei Stock index edged up 0.8 percent, Korea’s Kospi went 0.6 percent higher, while Singapore’s FTSE Straits Times Index ended up 0.2 percent. Hongkong’s Hang Seng Index closed up 0.1 percent. Chinese markets are closed for the week.

“We’re up based on a weaker yen. We’ve had some fairly positive data on the U.S. side last night,” remarked Alex Furber , senior client services executive at CMC Markets. This news makes a U.S. rate increase more probable, he also added.

Gaining traction and moving back into expansionary territory after a 49.4 plunge in August, the U.S. September purchasing managers index, a measure of factory activity, climbed to 51.5.

Solid manufacturing numbers sent the yen plunging 0.7 percent against the dollar, with traders exiting the safe-haven yen and turning back to risk assets. Major exporters gained as yen free-falls, with Honda Motor up at 1.9 percent, Olympus at 3.9 percent, and Panasonic closed 2 percent higher.

In other parts of Japan, financial equities made a rebound after worries about the status of Deutsche Bank prompted selloffs.

The Topix banking subsector added 1.6 percent. Individual banks like Mitsubishi UFJ Financial Group edged up 1.9 percent and Sumitomo Mitsui Financial Group was last up 1.6 percent.

Haruhiko Kuroda, governor of Bank of Japan, went in defense of his below zero interest-rate policy on Tuesday by saying it hadn’t damaged the bank’s ability to grant loans.

Also, yuan-denominated bond issuances hit record high with the Chinese currency’s formal inclusion in the International Monetary Fund’s special drawing-rights basket. Based on data released by Dealogic, there was a $619 billion volume of yuan-dominated bonds for the first three quarters of the year, rising 39 percent on year.

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