Yen Slides as BOJ Raises Rate, First in 17 Years: Markets Wrap

On Mar 19, 2024

(Bloomberg) — The yen weakened after the Bank of Japan brought an end to the world’s last negative rates in a widely expected move while keeping financial conditions easy for now.

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Japan’s central bank set a new policy rate range of between 0% to 0.1%, and also scrapped its yield curve control program while pledging to keep buying long-term government bonds. The nation’s sovereign bonds gained, while its shares advanced with the Topix index set for the highest close since 1990.

“A well-flagged decision from the BOJ helped avoid turmoil in financial markets and reflects the power of strong communication,” said Charu Chanana, a strategist at Saxo Capital Markets. “The BOJ’s commentary suggests that it expects accommodative conditions to persist for sometime, which is a signal that concurrent rate rises are unlikely.”

A gauge tracking Asia’s equity benchmarks remained on the back foot, dragged down by losses of more than 1% each in Hong Kong’s technology shares and South Korean equities.

The Australian dollar was on course for the weakest level in about two weeks, while the country’s stock market rose for a second day after the Reserve Bank of Australia kept policy rates at a 12-year high, with the economy showing signs of slowing further while unemployment trends higher.

Meanwhile, contracts for US shares signaled a muted start. That followed Monday’s rebound on Wall Street ahead of a raft of other central-bank decisions this week from the US to the UK. The S&P 500 halted a three-day slide, the Nasdaq 100 rose 1% and a gauge of the “Magnificent Seven” tech megacaps climbed twice as much.

Regional markets are seeing pull back, which potentially could indicate some caution ahead of the Federal Reserve’s meeting, according to Marvin Chen, a strategist with Bloomberg Intelligence. “With the recent US inflation data, markets could be preparing for a more hawkish tone from the Fed,” he said.

Elsewhere, Treasury yields edged lower in Asian trading. Yields on the two-year note hovered near 2024 highs Monday as expectations for Federal Reserve rate cuts continued to erode.

Back in the US, Wall Street is gearing up for more insights on the Fed’s resolve to ease as central banks set policy for almost half the global economy. The week features the world’s biggest agglomeration of decisions for 2024 to date, including judgments on the cost of borrowing for six of the 10 most-traded currencies.

Goldman Sachs Group Inc. economists led by Jan Hatzius changed their forecast to call for three quarter-point Fed cuts this year — instead of four. The change, which brings the forecast in line with the median forecast policymakers made in December, is “mainly because of the slightly higher inflation path,” they said.

In other markets, oil held a gain with the impact of Ukrainian drone attacks on Russian refineries and OPEC+ supply cuts in focus. Gold traded steady after rising in its previous session.

Key events this week:

Germany ZEW survey expectations, Tuesday
European Central Bank Vice President Luis de Guindos speaks, Tuesday
US housing starts, Tuesday
Eurozone consumer confidence, Wednesday
Fed rate decision; Chair Jerome Powell holds news conference, Wednesday
Reddit’s IPO, Wednesday
ECB’s Christine Lagarde speaks, Wednesday
Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, Thursday
Bank of England rate decision, Thursday
US Conference Board leading index, existing home sales, initial jobless claims, Thursday
Nike, FedEx earnings, Thursday
Japan CPI, Friday
Germany IFO business climate, Friday
Atlanta Fed President Raphael Bostic speaks, Friday
ECB’s Robert Holzmann and Philip Lane speak, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 1:59 p.m. Tokyo time
Nasdaq 100 futures fell 0.2%
Japan’s Topix rose 0.7%
Australia’s S&P/ASX 200 rose 0.4%
Hong Kong’s Hang Seng fell 1.1%
The Shanghai Composite fell 0.4%

Currencies

The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.0871
The Japanese yen fell 0.5% to 149.95 per dollar
The offshore yuan was little changed at 7.2090 per dollar
The Australian dollar fell 0.5% to $0.6529

Cryptocurrencies

Bitcoin fell 3% to $65,315.13
Ether fell 3.7% to $3,377.26

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Zhu Lin, Brett Miller and Winnie Hsu.