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The Japanese currency fell past 160 per dollar on Monday amid thin liquidity during a public holiday. Traders have been guessing as to when authorities might start buying the yen to stem a slide. Its declines have accelerated since late last week as Bank of Japan Governor Kazuo Ueda played down the impact of the weak yen on fueling inflation.
“Government intervention to stabilize the currency through selling foreign reserves is also looking increasingly likely,” economists including Duncan Wrigley from Pantheon Macroeconomics said in a note on Monday.
Hong Kong stocks led the region’s rally, with the Hang Seng Index headed for a technical bull market. Chinese benchmarks also jumped. The gains add to signs of a revival in the once-battered market amid a return in foreign money and an improvement in earnings. Property shares surged after major developer CIFI Holdings Group reached a solution with bondholders on its liquidity issues.
US equity futures also edged higher, bolstering Friday’s gains of more than 1% for the S&P 500 and Nasdaq 100.
Australian and New Zealand bond yields fell. An index of the dollar was steady on Monday. US government debt will not trade in Asian hours given the holiday in Japan.
Traders will also be focusing on the Federal Reserve’s policy meeting on Wednesday after the central bank’s preferred measure of inflation rose at a brisk pace in March, though roughly in line with estimates. With officials likely to hold rates steady at a more than two-decade high, interest will be on any pivot in the tone of the post-meeting statement and chair Jerome Powell’s press conference.
“With all measures of US consumer prices showing a steep acceleration over the past three to four months, the FOMC (Federal Open Market Committee) is bound to row back hard from its earlier predictions of meaningful policy easing this year,” Societe Generale economists including Klaus Baader wrote in a note to clients. “That said, markets have already scaled back pricing of rate cuts drastically, so unless chair Powell plays up the possibility of rate hikes, the market damage is likely to be modest.”
A gauge of US Treasury returns has slumped 2.3% this month, set for the biggest monthly drop since February last year, as hawkish Fedspeak and strong economic data pushed back rate-cut bets. Swaps traders now see only one Fed reduction for all of 2024, well below the roughly six quarter-point cuts they expected at the start of 2024.
Oil fell and gold edged lower in Asian trading as US Secretary of State Antony Blinken stepped up efforts to secure a truce in Gaza in meetings in the Middle East on Monday, in what could be a final chance to persuade Israel to call off an attack on Rafah.
In corporate news, Elon Musk made an unannounced trip to China on Sunday. The Tesla Inc. chief is seeking approval for driver-assistance software that could help arrest the carmaker’s revenue decline. Separately, L’Occitane International SA’s billionaire owner Reinold Geiger is close to making an offer to take the skin-care company private, according to people familiar with the matter.
