Asian shares wallowed near six-week lows on Wednesday, bruised by a fall in oil prices on renewed worries about a supply glut and as investors grew nervous about the diminishing capacity of the world’s major central banks to shore up economic growth.
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USD/JPY was firm on Wednesday lifted by a report that the Bank of Japan is mulling further monetary easing.
Meanwhile, the benchmark Nikkei 225 closes down 0.69 percent at 16,614.24 and the broader Topix index also closed 0.62 percent lower to 1,314.74 points.
The dollar rose against yen amid speculation about such action, which would widen the short-term U.S. -Japan yield gap, Mr. Sakai said.
Passersby walk past in front of electronic boards showing Japan’s Nikkei share average (L), the Japanese yen’s exchange rate against the USA dollar (C), British pound (R) and Euro (2nd R) outside a brokerage in Tokyo, Japan, July 6, 2016.
“The moves in developed market fixed-income, which are largely behind the volatility, have stemmed from Japan and the potential changes in monetary policy”, said Chris Weston, chief markets strategist at IG Markets. “The rest of the market participants have had to simply react”. The Dow dropped 1.4 percent, the tech-heavy Nasdaq slid 1.1 percent and the S&P 500 shed 1.5 percent to hit a two-month low. Although it has managed to hold above its 200-day moving average at 2,121, a break of that level could sap market confidence.
The BoJ is considering options to steepen the JGB yield curve, including adjusting its bond purchases or clarifying forward guidance on policy, they added.
US 10-year note and 30-year bond yields, which move inversely to prices, rose to 11-week peaks.
The rise in United States bond yields came even as expectations on the Federal Reserve’s monetary policy outlook hardly changed. On the contrary, long-term JGBs slumped as the United States 10-year Treasury yields broke the 1.70 percent mark on rising risk appetite among investors.
Late Friday, Fed funds futures indicated that investors see a 30 percent chance of a rate increase at the Federal Open Market Committee meeting this month, up from 18 percent late on Thursday. The prospects of a US rate hike by the year-end helped to underpin the dollar against other currencies.
The yen climbed 25 percent against the dollar in the year up to June, when the safe-haven currency hit a 2-1/2-year high of 99 yen per dollar in the aftermath of Britain’s shock vote to leave the European Union. It is considering taking interest rates deeper into negative territory, according to a report in the Nikkei newspaper.
China’s Shanghai Composite index was down about half a percent to hit a one-month low after a batch of upbeat data diminished the likelihood for additional PBOC stimulus.
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In late NY trading, benchmark 10-year Treasury notes were down 16/32 in price to yield 1.673 percent, compared with 1.616 percent late on Thursday.
