TOKYO — Asian shares traded higher on Monday on optimism about the week-ending rally on Wall Street, although eyes were on the Federal Reserve’s policy meeting later this week.
Sydney’s S&P/ASX 200 added 0.6% to 7,621.40 in early trading. South Korea’s Kospi rose almost 1.0% to 2,681.73. Hong Kong’s Hang Seng rose 1.2% to 17,859.39, while the Shanghai Composite rose 0.6% to 17,859.39.
Trading in Tokyo was closed for a Japanese national holiday, Showa Day. Japan has a series of holidays known as Golden Week through Monday.
Stephen Innes, managing partner at SPI Asset Management, said the mood in the market was positive following last week’s technology-driven rally on Wall Street.
The recent run of strong gains has boosted market sentiment, but what could be a risk factor is the falling Japanese yen, he added.
“Investors will be closely watching the latest developments in the notable and volatile decline of the Japanese yen against the US dollar and other major currencies,” Innes said.
The yen hit a new 34-year low after the Bank of Japan’s decision to leave interest rates unchanged on Friday. That was in line with expectations, but what was unexpected was the apparent lack of significant concern from the central bank about the exchange rate, Innes added.
During currency trading on Monday, the US dollar rose from 158.30 yen to 159.17 Japanese yen. The euro cost $1.0716, compared to $1.0699.
A weak yen could be a boon for Japan’s major exporters like Toyota Motor Corp., increasing the value of their foreign earnings when converted into yen.
But a weak currency can hurt the economy in the long run, as it reduces purchasing power and potential wage growth. Japan imports almost all of its energy.
On Wall Street, stocks ended a relatively solid week on Friday, with the S&The P 500 gained 1% to close its first winning week of the last four.
The Dow Jones Industrial Average rose 153 points, or 0.4%, and the Nasdaq composite rose 2%.
Recent data on US inflation has analysts expecting the Federal Reserve to leave interest rates unchanged. The key interest rate is at its highest level since 2001. A report published on Friday shows that inflation remains high.
After previously indicating there could be three rate cuts this year, top Fed officials have since said they may keep the key interest rate high for a while to ensure inflation moves toward the 2% target.
Treasury yields fell largely in the bond market on Friday due to the inflation report. The yield on the 10-year government bond fell to 4.66% from 4.71% at the end of Thursday. Two-year Treasury yields, which are more in line with Fed expectations, remained more stable. It dropped from 5.00% to 4.99%.
All in all, the S&The P500 rose 51.54 points to 5,099.96. The Dow Jones gained 153.86 to 38,239.66 and the Nasdaq gained 316.14 to 15,927.90.
In energy trading, U.S. crude fell 80 cents to $83.05 a barrel. Brent crude, the international standard, lost 91 cents to $88.59 a barrel.