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Shares edge higher; yen’s drop to 1990 low lifts Nikkei
Global Banking & Finance Review®
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By Kevin Buckland and Amanda Cooper
LONDON/TOKYO (Reuters) – Global shares rose on Wednesday, nudged higher by a rally in Japanese stocks as the yen sagged to its weakest since 1990, while the dollar held mostly steady in a holiday-shortened week that ends with a key reading on U.S. inflation.
The yen, which has lost more than 7% in value against the dollar this year already, weakened to as far as 151.975 to the dollar, triggering an immediate warning from Japan’s finance minister of “decisive action,” a phrase he last used in late 2022, right before monetary authorities intervened to buy the currency.
The yen has been sliding despite the Bank of Japan’s first interest rate hike for 17 years last week, as traders expect very gradual tightening and possible delays to long-expected Federal Reserve easing.
BOJ board member Naoki Tamura reinforced the dovish outlook regarding further tightening on Wednesday, saying the central bank should “move slowly but steadily toward policy normalisation”.
The Nikkei closed up 0.9%, although equities trading elsewhere was more subdued. The MSCI All-World index was flat on the day, as was Europe’s STOXX 600 index. S&P 500 and Nasdaq futures were both up 0.3% on the day.
“It’s choppy, directionless trading, and there’s a good reason for that: we’ve hit that time of the quarter when rebalancing flows are impacting the market,” said Tony Sycamore, a strategist at IG.
Another reason is that two key events — the release of the U.S. Federal Reserve’s favoured inflation indicator and public comments from Fed Chair Jerome Powell — come on Friday, when most markets are closed for a holiday, he added.
Inflation data “have not been doing what’s expected”, and in the event of a hot reading, “the bumpy road that the Fed has been talking about suddenly starts to look more like a mountain trek”, Sycamore said.
STRONG DOLLAR
The U.S. dollar index, which measures the currency against six others, including the yen, was 0.1% higher at 104.39, just below Friday’s five-week high of 104.49.
The dollar was last 0.16% stronger at 151.79 yen
“If there’s any kind of intervention, it only has a significant lasting impact if the direction of travel has already begun to turn,” Guy Miller, chief market strategist at Zurich Insurance Group said.
“We’ve seen intervention in many countries over the years, but usually, while that can work in the very short term, you need to see the currency itself fundamentally change direction, and then policy intervention can reinforce that or exacerbate the move,” he said.
The euro was flat at $1.0827. Sterling was steady at $1.2623.
U.S. long-term Treasury yields were stable at 4.23%.
Traders are trying to gauge which of the big central banks – the Fed, ECB or Bank of England – will be first to cut rates this year.
Meanwhile, Sweden’s Riksbank left interest rates unchanged but indicated it was likely to start easing monetary policy in either May or June.
Gold was little changed at around $2,178 an ounce, as it continued to search for a short-term floor following its surge to a record $2,222.39 last week.
Cryptocurrency bitcoin eased 0.2% to $69,654.
Oil fell for a second day after a report that crude stockpiles surged in the U.S., the world’s biggest oil user, and on signs major producers are unlikely to change their output policy at a technical meeting next week. [O/R]
Brent crude futures for May fell nearly 1% to $85.42 a barrel. The May contract is set to expire on Thursday and the more actively traded June contract eased 0.86% to $84.89.
(Additional reporting by Dhara Ranasinghe in London and Kevin Buckland in Tokyo; Editing by Muralikumar Anantharaman, Kim Coghill and Jane Merriman)
The yen is the official currency of Japan, symbolized as ¥. It is one of the most traded currencies in the world and is often used as a reserve currency.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
A central bank is a national institution that manages a country's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy.
Currency hedging is a financial strategy used to protect against potential losses due to fluctuations in exchange rates. It involves using financial instruments to offset risks.
A financial market is a marketplace where buyers and sellers engage in trading financial assets such as stocks, bonds, currencies, and derivatives.
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