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Asian markets end mixed after cautious trade as the dollar extends gains following Yellen speech

  • Asian shares were cautious
  • Fed Chair Janet Yellen's speech on Tuesday was seen as slightly hawkish
  • Dollar extended gains while euro continued to decline
  • Oil edged up

Greater China markets bucked declines in most Asian markets to post slight gains on Wednesday as investors digested Federal Reserve Chair Janet Yellen's overnight speech and as North Korea tensions took a backseat.

The benchmark Nikkei 225 slid 0.31 percent, or 63.14 points, to close at 20,267.05 despite the weaker yen as most automakers, financials and trading houses pulled back.

Across the Korean Strait, the Kospi closed lower after wavering around the flat line. The index finished the session 0.07 percent lower at 2,372.57 despite most tech stocks eking out gains after falling in the last session: Samsung Electronics closed up 0.04 percent and SK Hynix added 0.37 percent. Most manufacturing names saw declines. The tech-heavy Kosdaq, however, rose 1.06 percent by the end of the session.

Down Under, the S&P/ASX 200 came under pressure. The index slipped 0.12 percent to close at 5,664.3 with the information technology and telecommunication services sub-indexes leading losses.

Greater China markets posted moderate gains. Hong Kong's Hang Seng Index rose 0.36 percent by 3:16 p.m. HK/SIN. On the mainland, the Shanghai Composite inched higher by 0.06 percent to close at 3,345.4633 and the Shenzhen Composite advanced 0.776 percent to close at 1,979.2795.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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Fed Chair Janet Yellen's speech on Tuesday was regarded as slightly hawkish by market watchers after she said the central bank had to continue raising interest rates gradually in the face of "significant uncertainties."

However, Yellen also acknowledged that the Fed may have "misjudged" the strength in the labor market and inflation, suggesting the central bank could be more dovish in removing policy accommodation than previously expected.

"I think that what she did was really an extension of what she did last week after the post-FOMC Q&A, which is to say, drive home the idea that we believe in the idea of a hike in December, and we believe in the idea of three hikes next year," Tom Porcelli, chief U.S. economist at RBC Capital Markets, told CNBC's "The Rundown."

The probability of at least one more rate hike by the end of the year stood at 77.9 percent on Wednesday, according to the CME Group's FedWatch tool.

The greenback extended overnight gains after touching a one-month high following Yellen's comments. The dollar index, which tracks the greenback against a basket of rival currencies, stood at 93.323 at 3:18 p.m. HK/SIN after reaching as high as 93.286 overnight. That compared with levels at the 92 handle earlier this week.

The dollar also clawed back gains against the Japanese currency to fetch 112.73 yen. The U.S. currency had traded around the 111 handle during Asian trade on Tuesday after North Korea accused President Donald Trump of declaring war.

Ahead, investors awaited headlines on U.S. tax reform, which is expected to be unveiled on Wednesday U.S. time. Trump reportedly backs those tax reforms following the failure of the latest Republican attempt to repeal the Affordable Care Act.

Getting tax reform done right would add approximately $3 trillion in federal government revenue in the next decade, U.S. Commerce Secretary Wilbur Ross told CNBC on Tuesday.

In news related to the hermit state, the U.S. Treasury Department on Tuesday put sanctions on North Korean-linked banks and persons. The sanctions aimed to curb financial support for the North's weapons program. Trump said on Tuesday that the U.S. was "totally prepared" to use the military option against the North, although that was not its preferred choice, Reuters said.

U.S. stocks closed mixed on Tuesday. The Dow Jones industrial average slipped 0.05 percent, or 11.77 points, to close at 22,284.32, but the S&P 500 and tech-heavy Nasdaq finished slightly higher.

In corporate news, Alibaba affiliate Ant Financial will form a joint venture with Hong Kong's CK Hutchison to manage its payments services in Hong Kong, Reuters said. The agreement is likely to be completed by year-end, Reuters added. Shares of CK Hutchison were up 0.3 percent by 3:18 p.m. HK/SIN.

Shares of Wanda Hotel Development closed up 9.74 percent after Reuters reported the company said it was acquiring Wanda Hotel Management from Dalian Wanda Commercial Properties.

In currencies, the euro extended losses after falling to its lowest levels in a month overnight, trading at $1.1746 at 3:20 p.m. HK/SIN. The common currency had slid following a weekend election in Germany, which delivered Chancellor Angela Merkel a fourth term, but also a need to form a coalition.

"Dollar strength overnight also owes something to further pressure on the euro, linked to Sunday's German election results and with an eye to an 'illegal' referendum on Catalonia independence this weekend and then looking ahead, Italian elections next year," said Ray Attrill, head of FX strategy at National Australia Bank.

On the energy front, oil prices edged up after falling overnight. Brent crude tacked on 0.33 percent to trade at $58.63 a barrel and U.S. crude advanced 0.6 percent to $52.19. Prices had touched 26-month highs in the previous session after Turkey on Monday warned it could curb oil exports from Iraq to the rest of the world.

In economic news, profits made by Chinese industrial companies in August rose 24 percent compared a year earlier, Reuters said. That was above the 16.5 percent rise seen in July.