Fed adrenaline keeps pumping, PBOC inertia may drag
By Jamie McGeever
Sept 23 (Reuters) -A look at the day ahead in Asian markets.
The adrenaline from the Federal Reserve's bold interest rate cut and signal of intent to keep easing still appears to be coursing through global financialmarkets, which should see risk assets in Asia start the week on a strong footing on Monday.
Nikkei futures are pointing to a rise of more than 1% at the open in Japan, with Japanese shares also getting a boost from the yen's slide last week. The rise in longer-dated U.S. Treasury yields, however, could temper some of the optimism.
Friday's monetary policy decisions from Japan and China may also reverberate around Asian markets on Monday, and on that score, the picture is more mixed.
As was widely expected, the Bank of Japan decided not to raise rates, but it signaled it is in no hurry to raise them again. This helped push the yen to its weakest daily close since September 4, which in turn helped lift Japanese stocks.
The People's Bank of China also left rates on hold but this was more of a surprise. Domestically, China's weak economic and inflation dynamics appear to be screaming out for lower rates, and internationally, the Fed's outsized rate cut of 50 basis points gave the PBOC cover to move.
But it didn't, despite the mounting evidence that it perhaps should have. The latest figures to reflect investors' gloomy view of China were foreign direct investment flows on Friday - in the first eight months of the year they were down 31.5% on the same period last year, the biggest fall since January 2009.
The yuan is its strongest in 16 months though, thanks to the central bank's reluctance to cut rates and rising expectations that authorities will soon unveil stimulus that will revive growth, asset prices and confidence.
The yen, meanwhile, starts the week on a soft footing after a roller-coaster ride last week. It rallied through 140.00 per dollar for the first time in over a year but closed near 144.00 per dollar for a weekly loss of 2%, its worst week since April.
Japan's top currency diplomat Atsushi Mimura said yen carry trades of the past are likely to have been mostly unwound, but Tokyo is watching for any rebuild that could heighten market volatility, public broadcaster NHK quoted him as saying.
U.S. futures market positioning data shows speculators growing more optimistic on the yen for an 11th straight week, increasing their net long positions to an eight-year high.
The Asia and Pacific calendar on Monday is reasonably busy, with inflation figures from Malaysia and Singapore, flash September purchasing managers index (PMI) data from Australia and India, and New Zealand trade figures the highlights.
The Reserve Bank of Australia begins its two-day policy meeting too.
Here are key developments that could provide more direction to Asian markets on Monday:
- Australia flash PMIs (September)
- India flash PMIs (September)
- Malaysia inflation (August)
CFTC funds most bullish on yen since 2016 https://tmsnrt.rs/4eaFzdr
Chinese yuan strongest in 16 months https://tmsnrt.rs/3N0KLVj
Reporting by Jamie McGeever; editing by Diane Craft
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
