Asian currencies broadly strengthened against the USA dollar Thursday after the Federal Reserve’s latest policy statement left investors uncertain about the future path of US interest rates this year. The yen, meanwhile, notched its fourth rise in six days as news that Tokyo had unveiled a surprisingly large 28 trillion yen ($265 billion) stimulus package left traders wondering how aggressive the Bank of Japan would be when it meets on Friday.
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MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3 percent, climbing to its highest level since August 2015.
The Wall Street Journal Dollar Index, which measures the dollar against a basket of 16 currencies, was recently down 0.2% at 87.49, amid losses versus the euro, yen and other currencies.
The BoJ has become more relevant to some U.S. traders than their own central bank as a Bloomberg survey of economists projects governor Haruhiko Kuroda will expand his record stimulus programme on Friday.
Federal funds futures, which are used by investors and traders to bet on the Fed’s policy outlook, suggested the market was assigning only an 18% chance of a September rate increase, compared with a 27% chance before the FOMC meeting. Hong Kong stocks .hsi rose 0.4 percent as mainland Chinese investors continued to snap up shares through a stock market connection scheme.
“While further BoJ easing could marginally decrease yields, if that is coupled with fiscal stimulus, that could serve to shift market expectations for higher growth globally”, Cabana said.
U.S. RECOVERY: U.S. new home sales data in June exceeded expectations.
“In my opinion, we don’t have a systemic problem in the Italian banking system”, said JP Morgan Asset Management’s Maria Paola Toschi.
JP Morgan’s investment bank arm is, along with Mediobanca, in charge of drumming up interest in Monte dei Paschi’s capital hike. “We caution that there is a risk that markets may be caught wrong-footed in the event of a surprise downbeat tone”.
With the stress tests looming, Italian government bond yields rose at first only to edge down again as a new bond was sold at record low yields.
After a closely watched meeting the Fed held borrowing costs but noted the world’s top economy had improved and expressed less fear about the impact of Britain’s vote to leave the European Union last month.
ANOTHER TAKE: With a majority of analysts betting on one rate hike in December and two hikes next year, “the Feds are unlikely to rock the boat”, said Stephen Innes, senior trader at OANDA. Benchmark 10-year USA government bond yields fell back to 1.5 percent though there was no follow-through in Europe where yields nudged higher. The yield on the 10-year U.S. Treasury note was slightly lower to 1.56 percent.
USA crude rose 0.4 percent to $42.10 a barrel on bargain hunting after sliding to a three-month low of $41.68 on Wednesday after news US crude and gasoline stocks had surged, reflecting weak demand during the peak summer driving season.
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“Lower oil prices continue to be a significant challenge across the business, particularly in the upstream (operations)”, Shell’s Chief Executive Ben van Beurden said after it reported its slump in profits.
