Stocks up on US rate cut hope, yen in intervention zone
Asian stocks rose on Thursday and the dollar remained weak amid growing expectations that the Federal Reserve will cut interest rates next month, while the yen remained in focus as investors weighed the possibility of a rate hike before the end of the year.
A holiday-shortened week led to limited movements in the markets; While stocks are showing a largely optimistic outlook, currencies are showing a much calmer outlook. U.S. markets are closed Thursday for the Thanksgiving holiday and will be traded briefly on Friday.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.27 percent and was on track to break a three-week losing streak, tracking Wall Street’s gains. Japan’s Nikkei and South Korea’s Kospi indices gained more than 1.0 percent.
Investors’ focus will also be on China’s real estate sector, as property developer China Vanke seeks bondholders’ approval to postpone the repayment of two billion yuan (A$433.6 million) of onshore bonds.
A public bond extension would be the first for the state-backed real estate developer, which has many projects in China’s biggest cities and could trigger a new wave of anxiety in both financial and real estate markets.
While the U.S. data flow has resumed since the record 43-day government shutdown ended in mid-November, many of the economic reports released so far are significantly out of date and offer little insight into the health of the economy.
This has put investors’ attention squarely on comments made by Fed officials to gauge the path of US monetary policy; This week, comments by San Francisco Federal Reserve Bank President Mary Daly and Fed Governor Christopher Waller, which strengthened interest rate cut expectations, also attracted attention.
CME FedWatch showed that traders are now pricing in an 85 percent chance of a rate cut next month, compared to just a 30 percent chance a week ago.
George Boubouras, managing director of K2 Asset Management, said the weakness in the labor market was enough to offset the current inflation pulse and a December rate cut appeared reasonable on balance.
“Although core inflation is above target, the US’s 10-year breakeven inflation rate is around 2.25 percent, indicating that markets are generally comfortable with inflation expectations remaining reasonable. Short-term USD weakness will persist but will reverse in the March 2026 quarter.”
The euro rose to its highest level in more than a week at 1.16045 in early trading. The dollar index, which measures the U.S. currency against six rivals, was little changed at 99.523 after falling 0.28 percent the previous day.
Data on Wednesday showed that the number of Americans filing new claims for unemployment benefits fell to a seven-month low last week; This shows that layoffs remain low.
Sterling rose to a one-month high of US$1.3247 ($A2.0324) after UK finance minister Rachel Reeves’ budget helped ease some concerns about Britain’s long-term financial situation.
The Japanese yen strengthened slightly to 156.16 per dollar as investors set their sights on possible intervention from Tokyo after weeks of verbal objections from officials to stem the currency’s relentless slide.
Prime Minister Sanae Takaichi on Wednesday dismissed the possibility that Japan could face a British-style “Jar moment” or loss of market confidence from expansionary fiscal policy.
The Japanese currency has weakened by about 10 yen since the beginning of October as Takaichi took over amid concerns that the administration’s spending plans will require heavy borrowing and doubts about the timing of the Bank of Japan’s next rate hike.
Sources told Reuters that the BOJ is preparing markets for a possible interest rate hike starting next month as it may follow a more consistent path of rate hikes to change the course of the currency.
Bitcoin rebounded above US$90,000 ($A138,081) on Thursday, putting it on track to break a four-week losing streak with a gain of almost 3.0 per cent. Gold was flat at US$4,164.81 ($A6,389.80) per ounce after rising 0.8 per cent in the previous session.
Australia’s Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national news channel and has been providing accurate, reliable and fast-paced news content to the media industry, government and corporate sector for 85 years. We inform Australia.
