Asia’s stock markets struggled for gains on Wednesday and the US dollar rose to a two-month high as persistent worries about the global economic recovery had investors preferring safety. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3% for its first gain this week, but the mood was hardly bullish. Japan’s Nikkei returned from a two-day holiday to slip 0.4%. Markets elsewhere offered only a lacklustre follow up to Wall Street’s rebound, with Hong Kong and Shanghai steady. Australia’s ASX 200 gained 2.6%, Aussie bonds rallied and the Aussie dollar slipped on growing expectations that the central bank eases policy again next month. The standout mover was the gaining dollar, which briefly sent spot gold to a six-week low of $1,881.65 an ounce. “There looks to be a squeeze on dollar shorts,” said Westpac FX analyst Sean Callow, with positions stretched and no new stimulus from the Federal Reserve to keep it under pressure. The greenback begun gaining after hawkish remarks from a senior US Federal Reserve official overnight and extended in Asia amid a general tone of risk aversion – adding 0.2% against a basket of currencies to its highest since July. Chicago Fed President Charles Evans, due to become a voter on the Federal Open Market Committee in 2021, said on Tuesday the Fed still needed to discuss its new inflation approach but it “could start raising rates before we start averaging 2%.” That crimped inflation expectations, lifted US real yields and set the dollar rising. “Attempts to fade dollar bounces seemed to be weakening,” said OCBC Bank FX strategist Terence Wu. “We put that down to a lack of fresh dollar downside drivers.” The euro was forced below $1.17 in Asia and last traded at $1.1683 and traders say more downside risk is possible if rising coronavirus infections in Europe weigh on preliminary purchasing managers’ index figures due at 0800 GMT. EASY DOWN UNDER The recovery of US stocks on Tuesday, like the slump through September, lacked an immediate trigger and comes with plenty of geopolitical and economic risks to the recovery. China-US tensions are simmering, Britain has re-imposed some curbs on restaurants to try and head off a second wave of coronavirus infections and the US election campaign seems to be distracting Congress from passing major aid bills. In Asia, a Tuesday speech from a senior central banker in Australia, which flagged more monetary support, seems to have refocused investor attention on the long-term economic malaise that job losses and consumption cuts could cause. “In the (central) bank’s current figuring, restoration of the full employment rate … is in the far distant future,” Westpac economist Bill Evans said in a note. “That means that policy needs to be very stimulatory,” he said, forecasting an interest rate cut in Australia next month. The Australian dollar fell 0.5% to a six-week low of $0.7116 on Wednesday and longer-tenor yields sank in anticipation that central bank bond buying might be extended. Elsewhere in Asia, the Malaysian ringgit fell sharply amid fresh political turmoil as opposition leader Anwar Ibrahim claimed he now has enough support to oust the government and command a majority in parliament as leader himself. Oil prices continued to retreat from last week’s gains, slipping in Asia after an industry group reported a surprise rise in US crude inventories, adding to worries about demand. Brent crude futures were last down 0.7% at $41.42 a barrel and US crude futures slipped 0.9% to $39.43. US bonds were steady, with the yield on benchmark 10-year US debt up less than one basis point at 0.6724%.