©Reuters. A man walks past an electronic board showing stock displays outside a brokerage, in Tokyo, Japan, March 17, 2023. REUTERS/Androniki Christodoulou
By Wayne Cole
SYDNEY (Reuters) – Asian shares rose on Monday as investors hoped this week’s U.S. inflation data would not derail prospects for lower interest rates, while the risk of currency intervention by Japan raised the yen’s decline has been blocked for the moment.
The U.S. personal consumption expenditure (PCE) price index is forecast to rise 0.3% in February, holding the annual pace at 2.8%. Any increase would be interpreted as a setback to hopes of a rate cut by the Federal Reserve in June.
Many markets are closed on Friday for Easter, when the PCE data is due to be released, so the full reaction will have to wait until next week.
Fed Chair Jerome Powell was dovish enough last week to leave futures implying about a 74% chance of easing in June, up from 55% the week before.
Powell will participate in a moderated discussion at a policy conference on Friday, while Fed governors Lisa Cook and Christopher Waller will also be present this week.
Europe has its own inflation tests with consumer price data from France, Italy, Belgium and Spain, ahead of the EU’s overall consumer price index report on April 3.
Sweden’s central bank meets on Wednesday and is generally expected to keep rates at 4.0%, although surprise easing by the Swiss National Bank (SNB) last week has markets anticipating a statement accommodating.
Expectations of falling financing costs globally have been a boon for stocks, with stocks up nearly 10% year to date. As of early Monday, Nasdaq futures were little changed.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.1%, just below eight-month highs.
fell 0.4%, after rising 5.6% last week, hitting a new all-time high as the yen weakened. ()
While the Fed was accommodative last week, it was hardly alone, with the Swiss central bank (SNB) actually cutting rates while the Bank of England (BoE) and the European Central Bank (ECB) ) left markets looking for relief from June onwards.
The People’s Bank of China (PBOC) also surprised markets on Friday by letting the yuan fall past 7.2 per dollar to a four-month low, amid talk of further easing of monetary policy.
JAPAN JAWBONES THE YEN
“We believe the dollar’s rebound reflects the more explicitly dovish stance of other major central banks, particularly the SNB and the BoE,” said Jonas Goltermann, deputy chief markets economist at Capital Economics.
“The PBOC’s apparent decision to let the dollar weaken dramatically contributed to the dollar’s overall positive tone,” he added. “Overall, the greenback is off to a good start heading into the Easter holiday period, and US economic data is likely to continue to keep it strong.”
Even the Bank of Japan’s (BOJ) abandonment of ultra-loose policies failed to dent the dollar, as investors assumed it was not the start of a series of hikes and futures implied a rate of just 20 points basis by the end of the year.
The dollar held at 151.30 yen on Monday, after rising 1.6% last week to a high of 151.86. Markets are cautious about testing 152.00 as this is a level that has attracted Japanese intervention in the past. [USD/]
Indeed, Japan’s top currency official warned Monday that the yen’s current weakness does not reflect fundamentals and that excessive moves are unwelcome.
The euro was stuck at $1.0808, having been dragged lower in the wake of the Swiss franc following the SNB’s shock rate cut.
The dollar’s strength took some of the shine off gold which stood at $2,168 an ounce, after hitting a record high of $2,217.79 last week. [GOL/]
Oil prices were supported by Ukraine’s attacks on Russian refineries, along with data showing a decline in the number of US rigs. [O/R]
rose 21 cents to $85.64 a barrel, while rising 23 cents to $80.86 a barrel. [O/R]