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Asian stocks retreated on Wednesday, failing to follow Wall Street’s gains, while the dollar was near a 13-month high as concerns about Turkey’s financial crisis weighed on investor appetite despite the lira’s move away from an all-time low.

The lira –which plummeted to a record low of 7.24 to the dollar at the week’s start, rattling global markets– was slightly weaker at 6.415 after rebounding more than 8 per cent overnight.

Wall Street’s three main indexes rose on Tuesday as the lira’s climb eased fears of broader financial contagion for now. A string of robust earnings also boosted U.S. shares.

But the rise in U.S. shares did not carry through to Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan sliding 0.8 per cent after bouncing 0.4 per cent the previous day when the lira showed signs of stabilizing.

Hong Kong’s Hang Seng dropped more than 1 per cent and the Shanghai Composite Index fell 0.1 per cent. Signs of the world’s second-largest economy losing momentum and the ongoing Sino-U.S. trade conflict have weighed on Chinese equities.

Australian stocks rose 0.1 per cent and Japan’s Nikkei slipped 0.4 per cent after rallying more than 2 per cent on Tuesday. South Korean markets were closed for a public holiday.

“The equity markets are waiting for the next steps after gaining strongly yesterday. The drop by the Turkish lira may have stopped, but the country is yet to tackle the fundamental problems facing it, and this has kept market sentiment subdued,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

Keeping the markets wary, Turkish President Tayyip Erdogan said on Tuesday that Ankara would boycott electronic products from the United States, retaliating in a row with Washington that has helped drive the lira to record lows.

Underscoring lingering concerns over the crisis in Turkey, the dollar hovered near a 13-month peak against a basket of currencies, supported by its safe-haven status.

The dollar index, which measures the greenback’s strength against a group of six major currencies stretched overnight gains and reached 96.82,, its highest since late June 2017.

The strength of the U.S. currency was compounded by the euro’s fall, which has been dogged by potential risks to European banks from the financial turmoil in Turkey.

“The lira rallied yesterday, but there is not remedial plan for Turkey’s internal and external imbalances. Europe’s banks will have to reserve more against these potential losses, and already low capital adequacy ratios will be tested,” wrote Carl Weinberg, chief international economist at High Frequency Economics.

The euro dipped to $1.1326, its weakest since July 2017. The euro also struggled near a 13-month low versus the Swiss franc, a traditional safe-haven currency.

Adding to overnight gains, the dollar last traded up 0.15 per cent at 111.32 yen.

China’s onshore yuan came within a whisker of a 15-month low of 6.8965 per dollar marked early in August after the country’s central bank set the weakest mid-point since May 2017 following the dollar’s broad surge.

Government bond yields, meanwhile, nudged higher amid the ebb in risk aversion.

The benchmark 10-year Treasury note yield stood around 2.89 per cent, having bounced from a three-week low of 2.848 per cent set on Monday.

Yields on British gilts and French bonds have also pulled away from multi-week lows.

Crude oil prices felt pressure from a stronger dollar, which increases the cost burden on non-U.S. buyers of commodities.

Brent crude futures dipped 0.2 per cent to $72.31 a barrel and U.S. crude shed 0.35 per cent to $66.81 a barrel.

Spot gold fell to an 18-month low of $1,190.05 an ounce, having declined 1.6 per cent this week.

Three-month copper on the London Metal Exchange edged down 0.2 per cent to $6,036 a tonne, coming close to a one-year low of $5,988 seen in July. Easing fears over a possible strike at a mine in Chile accelerated the metal’s fall.

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