Shares in Asia rise, the yen wobbles after a volatile start to the week

Asian shares rose slowly on Tuesday as investors awaited a slew of economic data, corporate earnings and the US Federal Reserve’s policy meeting, while the yen weakened slightly a day after a suspected intervention rescued it from a 34-year low.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.36 percent higher and expected to post a gain of almost 1 percent this month, the third straight month of gains. The Nikkei rose 1 percent as Japan reopened on Monday after a holiday.

Chinese shares were mixed in early trading, with the blue-chip index down 0.07 percent, while Hong Kong’s Hang Seng index rose 0.5 percent.

This week’s data includes European inflation and US labor market reports, while the Fed will meet on Tuesday for its two-day meeting, where it is expected to keep rates high but adopt an hawkish tone.

The spotlight remains on the yen after a volatile start to the week as the Japanese currency rose to 154.40 per dollar on Monday from a new 34-year low of 160.245, with traders citing authorities’ intervention in buying of the yen.

Markets had anticipated that Japan could step in to support the yen after the currency fell more than 10 percent against the dollar this year.

On Tuesday, the yen weakened 0.38 percent to 156.92 per dollar in early trading.

Japan’s top currency diplomat Masato Kanda said on Tuesday that authorities are prepared to handle foreign exchange matters “24 hours a day”, but again declined to comment on whether the Finance Ministry had intervened a day earlier to strengthen the yen. to support.

“Whether it’s London, New York or Wellington (hours), it doesn’t matter,” the deputy treasury minister for international affairs told reporters.

Vasu Menon, director of investment strategy at OCBC, said intervention alone cannot change the wide gap in interest rates that is partly driving the yen’s decline.

The yen is under pressure as US yields have risen and Japan’s have remained near zero, pushing cash out of the yen into higher-yielding assets.

“Much now depends on the outcome of the Fed policy meeting this week,” Menon said.

“Markets will wait with bated breath to see if the Fed becomes more aggressive, which will support the US dollar and undermine the yen’s appeal. If the Fed does not sound as aggressive as markets fear, this could help the yen strengthen. .”

Investors have had to continually adjust their expectations for the timing and size of U.S. interest rate cuts this year following better-than-expected inflation reports, with markets pricing in a 57 percent chance of a rate cut in September, CME FedWatch Tool showed.

Traders are now pricing in a 35 basis point cut in 2024, drastically lower than the 150 basis points of the easing at the start of the year.

Changing expectations for US interest rates have pushed up government bond yields and the dollar, dominating the foreign exchange market. Against a basket of currencies, the dollar was little changed at 105.73. The index rose more than 1 percent in April and more than 4 percent this year.

Meanwhile, earnings season is heating up this week with high-profile results from Amazon.com and Apple.

Overnight, U.S. stocks closed higher, led by sharp gains in Tesla shares after the electric vehicle maker made progress in gaining regulatory approval to launch its advanced driver assistance program in China.

U.S. crude fell 0.18 percent to $82.48 a barrel and Brent traded at $88.31, down 0.1 percent on the day. (OR)

Spot gold was flat at $2,334.79 an ounce. (GOL/)

First print: April 30, 2024 | 8:06 am IST