ASIAN stocks and US futures rose on Thursday after the Federal Reserve downplayed risks of an interest rate hike, while the yen was bumpy after another burst of suspected intervention from Japan.
Shortly after Fed Chair Jerome Powell had finished telling reporters the Fed may have to leave rates elevated, the yen surged against the dollar.
It was the second sudden leap in the ailing Japanese currency this week and markets have assumed it is authorities stepping in as yen-buyers. The yen traded as strong as 153 to the dollar before sliding back to around 156 in Asia.
S&P 500 futures rose 0.5 per cent, pointing to the cash market recouping a late slide on Wall Street. MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.6 per cent, led by a 2 per cent surge in Hong Kong.
Tokyo’s Nikkei was flat.
Oil was nursing a heavy fall on demand worries and a surprise jump in US stockpiles. Brent crude futures were up 30 cents a barrel to US$83.74, after touching a seven-week low of US$83.29 on Thursday. US crude was at US$79.31 a barrel
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The Federal Reserve had left interest rates on hold and chair Jerome Powell told reporters that inflation was too high and progress in bringing it down was uncertain. But he did not entertain growing speculation the Fed may need to hike rates.
“There are paths to not cutting and there are paths to cutting. It’s really going to depend on the data,” he said, which traders interpreted as all but ruling out a rate hike.
“The key takeaway is the Fed still thinks it’s much more likely the next move is a cut, than a hike, and the door is very much open,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney.
Treasuries rallied, pushing yields lower, as the Fed also said it would slow down its balance-sheet runoff. However in Asia some of that move was unwound. Ten-year Treasury yields rose 3.3 basis points to 4.624 per cent in Tokyo, having fallen 9.3 basis points in New York on Thursday. .
Two-year year yields, which fell more than 10 bps in New York overnight, rose 1.2 bps to 4.951 per cent.
After pricing in as many as six rate cuts for 2024 earlier this year, markets now price only one, in December.
Intervention watch
In foreign exchange trade all eyes were on the yen, which after a leap in late New York trade spent much of the Asia session giving up a majority those gains. The yen has been on a downtrend for years as global interest rates have gone up sharply while Japan’s stayed ultra-low.
The dollar was last up about 1 per cent to 156 yen, the euro was up 1 per cent at 167.19 yen and the Aussie was trading near 102 yen.
Tokyo money market data indicated Japanese authorities may have spent nearly US$35 billion buying the yen on Monday, not long after it had touched 160 per dollar, lows last visited over three decades ago.
“There is persistent pressure on the yen to weaken in the medium to long term,” said Hirofumi Suzuki, chief FX strategist at SMBC in Tokyo.
“Even if there is FX intervention, it will not change the yen’s depreciation trend. The Fed’s monetary policy developments remain most important in the medium to long term.”
On the earnings front chipmaker Qualcomm beat market expectations for sales and profit, sending its shares up 4 per cent in after-hours trading.
Focus later on Thursday will be on Apple results, where markets have braced for a big drop in sales and are waiting to hear of the company’s plans for AI in iPhones.
Outside of oil, trade in other commodities was subdued by holidays in China, where markets are closed for the rest of the week. Gold rose overnight and was last holding at US$2,319 in Asia trade. REUTERS
