Asian shares started on a positive note on Monday, ahead of the Federal Reserve’s policy meeting later in the week, while the dollar broke past the key psychological level of 160 yen for the first time in decades.
Oil prices fell on expectations that longer US interest rates would dampen demand, while news of a possible ceasefire in Gaza eased fears of supply constraints.
The dollar hit a high of 160.245 yen – its strongest level in 34 years – during a sudden but brief rise during Asian hours. The latter was 0.5 percent higher at 159.14 yen.
Some analysts attributed the move to thinned liquidity as Japan was on holiday on Monday and traders sought to test the Japanese authorities’ resolve in defending the yen.
Despite the yen’s continued slide to new multi-decade lows, Tokyo has so far resisted intervening in the currency market, even as officials step up warnings against excessive yen moves.
“Markets are testing the upside,” said Christopher Wong, currency strategist at OCBC, of the dollar/yen currency pair.
The BOJ had kept rates near zero at the end of its monetary policy meeting on Friday and ruled out a shift to a full-fledged cut in the BOJ’s bond purchases, striking a dovish tone than some had expected.
That, and bets that the Fed is likely to delay the start of its rate-cutting cycle, will give new impetus to yen gains.
In the broader market, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.56 percent, helped by Wall Street’s positive lead on Friday following a rally in mega-cap growth stocks.
The positive sentiment carried over into the new week, with Nasdaq futures and S&P 500 futures each up 0.2 percent.
The Hang Seng index in Hong Kong also rose 0.77 percent, while the Chinese blue chip index was 0.06 percent higher.
The Fed’s two-day monetary policy meeting, which starts on Tuesday, is the focus this week, with the central bank expected to leave interest rates unchanged.
However, the focus will be on any indications of the central bank’s rate outlook after repeated sets of stronger-than-expected U.S. economic data and still persistent inflation pressures derailed market bets on how quickly the Fed could begin its rate-easing cycle.
Market prices indicate that a first Fed rate cut is expected in September, following a start in June just a few weeks ago, with an expected easing of just over 30 basis points this year.
“We’ve seen quite a significant repricing of interest rate expectations in the US, and that’s kind of a benchmark for global interest rates,” said Jarrod Kerr, chief economist at Kiwibank.
“I think the Fed will repeat comments this week that rate cuts are not as close as they had hoped.”
The prospect of US interest rates remaining restrictive for longer has supported the dollar, although it was largely on the back foot on Monday, sliding lower against most currencies except the yen. (FRX/)
Against the dollar, the euro rose 0.21 percent to $1.0715, while sterling rose 0.23 percent to $1.2522.
The dollar index was little changed at 105.98, but was on track for a monthly gain of 1.4 percent.
In commodities, Brent fell more than 1 percent to $88.55 per barrel, while U.S. crude also fell 1 percent to $83.02 per barrel.
Both are up about 15 percent this year, partly due to fears of supply disruption amid escalating geopolitical tensions in the Middle East.
A Hamas delegation will visit Cairo on Monday for talks aimed at securing a ceasefire, a Hamas official told Reuters on Sunday, as mediators stepped up efforts to reach an agreement ahead of an expected Israeli attack on the southern city of Rafah.
Gold fell 0.34 percent to $2,329.37 an ounce.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)
First print: April 29, 2024 | 9:11 am IST