The Japanese Yen edged higher against the US Dollar in a flight to save haven currencies after a rout in global equity markets.
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Losses in stock markets across Asia deepened as rising bond yields and soaring volatility forced investors to unwind positions.
The session in Asia followed a mixed finish in the USA on Wednesday, with the Dow Jones industrial average (Dow Jones Global Indexes:.DJI) closing down 31.98 points, or 0.18 percent, at 18,034.77. But it will consider changing its prime policy target to the 0.1 percent negative rate it now charges for a portion of excess reserves financial institutions park with the bank, the sources said.
The Reserve Bank next reviews interest rates on September 22 but the market is betting there’s more prospect of a cut at the full monetary policy statement on November 10, provided economic data is weak.
Asian markets mostly fell on Wednesday as uncertainty over the future of central bank monetary policy weighed on buying interest while warnings of an extended oil glut sank energy firms.
“Secondly, some of the biggest systematic funds have had to alter their portfolios”.
Investors will be keeping their fingers crossed that as BoJ policymakers discuss keep an eye on the potential fallout for global bond markets as they discuss their various monetary stimulus options.
Oil prices rose as much as 2 percent on Thursday, tracking a surge in gasoline futures and higher USA equity markets that helped stem a two-day rout in crude futures.
The region’s traders were given a rocky lead from Wall Street where all three main indexes ended more than one percent lower as a plunge in crude prices shredded already tender nerves. Although it has managed to hold above its 200-day moving average at 2,121, a break of that level could sap market confidence.
US home mortgages are tied to the 10-year Treasury yield, and the 30-year conventional mortgage rate has ticked up slightly by about an eighth of a point to roughly 3.5 percent.
Last year, the Fed surprised markets by holding rates steady in June and delaying a hike until December, reminiscent of the time when it held off on tapering its asset purchase program for months.
Concerns about the policy effectiveness of the world’s major central banks have triggered a steepening trend in bond yields in recent sessions.
That’s because short-term yields climb as the c e n t r a l b a n k i n c re a s e s i t s benchmark.”The US Treasury curve is basically telling me they don’t expect a rate hike next week at all”, said Martin van Vliet, an interest-rate strategist at ING Groep NV in Amsterdam. That something, of course, is lifting the USA fed funds rate (sending the USA dollar higher), should the FOMC adopt dove-turned-hawk Boston Fed president Eric Rosengren’s advice that “A failure to continue on the path of gradual removal of accommodation could shorten, rather than lengthen, the duration of this recovery”. The euro was little changed at $1.1240.
The BOJ shocked markets in January by cutting rates below zero for the first time in an attempt to weaken the yen, but the yen reaction was only temporary, and it has since gained more than 15 percent against the dollar.
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Short-dated Japanese bond yields fell, with the five-year JGB yield slipping 2.5 basis points to minus 0.200 percent while the two-year yield fell 2.0 basis point to hit a six-week low of minus 0.265 percent.
