Asian shares set to finish 2020 at a record high, riskier currencies in favor

December 31, 2020: Asian shares are set to end a tumultuous 2020 by hovering near record highs on Thursday while riskier currencies cruised near 2-1/2-year peaks, buoyed by hopes that COVID-19 vaccine rollouts will help the world beat the pandemic.

The upbeat mood, reflected in overnight gains on Wall Street, drubbed the "safe-haven" dollar and drove currencies such as the euro, sterling, the Australian dollar and the New Zealand dollar overnight to highs not seen in more than 2-1/2 years.

E-Mini S&P futures rose 0.11% to 3,728.5, while MSCI's gauge of Asia-Pacific shares excluding Japan was little changed at 661.76, a hair's breath from its record high of 661.80.

For the year, the MSCI index is up nearly 20%, outpacing a 15.5% gain in the U.S. S&P 500.

Australian shares lost 0.23% while the Japanese stock market is shut on Thursday.

Investors looking forward to a brighter 2021 will be eyeing China's official manufacturing Purchasing Manager's Index for December, due on Thursday at 0100 GMT.

Analysts expect the index to show China's factory sector growing at a solid pace in December as the world's second-largest economy steadily rebounds from the coronavirus crisis.

Still, some analysts warned that this year's heady gains in global stock markets could mean a lot less room for further appreciation in 2021.

"We'd say 80% of all the baseline good news expected in 2021 is already incorporated," analysts at DataTrek Research said in a note, adding that some "real surprises" would be needed next year for the U.S. stock market to rise another 10%.

For now, however, healthy risk appetites kept investors from the U.S. dollar.

The struggling dollar dropped 0.46% to 89.59 against a basket of currencies, plumbing a low not seen since April 2018.

A listless dollar helped the euro stand firm at a 32-month high of $1.2298. Sterling was also steady $1.3611, a level last seen in May 2018. The Australian dollar and New Zealand dollar also held their ground at their respective 32-month highs of $0.7665 and $0.7215.

A battered dollar also supported gold, with bullion prices up a touch at $1,894.225 an ounce.

Oil prices bucked the trend, however, retreating a shade as swelling year-over-year supply led some traders to view any economic recovery ahead to be gradual rather than swift.

U.S. West Texas Intermediate crude shed 0.02% to trade at $48.39, far below about $62 at the start of 2020.

Treasuries were little changed, with benchmark U.S. 10-year yields at 0.9264% and two-year yields at 0.1250%.

Reuters