Asian stocks remain stable, with the central banks of Japan and China halting the dollar’s rise
SINGAPORE, Sept 12 (Reuters) – Asian stock markets edged higher on Tuesday as comments from central banks in China and Japan halted the dollar’s advance, giving traders a breather ahead of U.S. inflation data that could influence when or whether the Federal Reserve will raise interest rates further.
The yen posted its best day against the dollar in two months overnight after Bank of Japan Governor Kazuo Ueda said policymakers could have enough economic information by year’s end to decide that short-term interest rates need to rise .
The yuan had its best day in six months after authorities vowed to correct unilateral moves and Reuters reported that the central bank stepped up scrutiny of dollar purchases.
However, both remain near their weakest levels of the year, with the yuan at 7.3016 per dollar in offshore trading and the yen last at 146.68 per dollar, slightly weaker than its best reading on Monday.
Japanese government bonds remained under pressure on Tuesday, with 10-year Japanese government bond yields rising 1 basis point to a new high of 0.71%.
“The result of Ueda’s comments was a sharp rise in Japanese swap and government bond yields,” said Chris Weston, head of research at Melbourne brokerage Pepperstone.
“(It) is definitely constructive for long yen positions. (But) I refrain from getting too excited at this stage… where the measures are more of a medium-term question – we won’t get the result of the spring wage negotiations until April 2024.”
Investors in China took some comfort from news that the country’s largest private real estate developer, Country Garden (2007.HK), received creditor approval to extend repayments on six onshore bonds by three years.
As a result, Hong Kong’s Hang Seng Mainland Properties Index (.HSMPI) rose as much as 1.5%, reversing an earlier decline of more than 2%.
“This is probably just another case of gamble, but it appears to have at least slowed the decline in the housing index,” said Matt Simpson, senior market analyst at City Index.
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) gained 0.12%. Japan’s Nikkei (.N225) rose 0.61%, with markets looking to U.S. inflation data and this week’s European Central Bank meeting to set interest rate expectations and sentiment.
U.S. numbers due on Wednesday expect core annualized inflation to fall to 4.3% in August, although the overall figure is expected to rise to 3.6%.
“A lower-than-expected reading could slow the US dollar’s rise, while a higher reading could potentially unsettle risk sentiment as it would reinforce market expectations for further rate hikes, and this could fuel dollar strength,” said OCBC strategist Christopher Wong.
The interest rate futures markets are pricing in a probability of around 45% for another interest rate hike in the US by the end of the year.
Investors’ appetite for risk will also be tested this week when British chip designer Arm Holdings goes public in New York, aiming to raise nearly $5 billion.
Overnight, a weaker dollar and Tesla’s upgrade by Morgan Stanley analysts helped lift US stock markets. Tesla (TSLA.O) rose 10%. The S&P 500 (.SPX) rose 0.7%.
U.S. futures fell 0.11% in early Asian trading.
Elsewhere in foreign exchange markets, the Australian dollar has been weighed down by a further decline in consumer sentiment, which has been below the neutral 100 mark since March 2022 – the longest trend since a recession in the early 1990s.
The Aussie, which rallied on Monday with gains in the yuan, was last trading 0.04% higher at $0.6433. Meanwhile, the New Zealand dollar fell 0.3% to $0.5918.
The euro hit a one-week high against the dollar, although moves were muted as investors pulled back from long positions in the euro ahead of Thursday’s ECB meeting. The pricing implies about a 56% chance that policymakers will leave rates unchanged.
“There is a feeling that the ECB is already through the cycle,” Maybank analysts said in a note to clients.
“Recent PMI data suggests that the growth outlook may be worsening and poses the risk of further downward movement in the euro. This is further reinforced by ongoing expectations of a further rate hike by the Fed.”
The benchmark 10-year Treasury yield was stable at 4.2940%.
In commodity markets, Brent crude oil futures were steady at $90.96 a barrel. Gold held steady at $1,922 an ounce while Bitcoin fell out of favor, falling below $25,000 for the first time in three months on Monday.
Edited by Lincoln Feast and Simon Cameron-MOore
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