Assessment to focus on factors that have potentially hampered achievement of the 2% price stability and the cost and benefits of negative interest rates.
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Risk aversion in Asian markets today helped the yen firm up although volumes were low as many markets in Asia (such as China, Hong Kong and Malaysia) were shut for a public holiday today.
Many market players expect it to indicate a preference for a steeper yield curve to cushion the blow on banks from negative interest rates, but there is also focus on whether the central bank will cut rates deeper into negative territory.
“The Bank of Japan meeting will be an interesting lead-in to the Fed”, said Paul Nolte, portfolio manager at Kingsview Asset Management. The aussie traded above the key $0.75 level against the USA dollar to touch a session high of $0.7526.
Economic data out from the USA today comprises of inflation numbers and retails sales figures, as well as employment and manufacturing numbers, and will be of utmost importance being the last wave of significant data before the FOMC meet for monetary policy and the U.S. interest rate decision next week.
Japan’s Nikkei advanced 0.4 per cent, paring losses for the week to 2.9 per cent, while Australian shares climbed 1.2 per cent, on track for a weekly decline of 0.8 per cent.
The yield curve between five-year note yields and 30-year bond yields flattened to 125.60 basis points, after reaching its steepest levels in two-and-a-half months on Thursday at 130 basis points.
The benign rate environment has helped fuel major USA stock indexes to all-time highs in July and August.
While the BOJ is widely expected to combine a cut in short-term rates with an attempt to steepen the yield curve, possibly by making its bond buying target more flexible, in its next easing, market players say uncertainty surrounding its policy meeting on Sept 20-21 is unusually large.
Few Japanese companies believe the central bank’s aggressive monetary stimulus will achieve its goal of spurring inflation, a Reuters poll found, with firms citing negative fallout from the programme more than positive effects.
This is easy. In the week ahead, the Federal Reserve’s decision and statement on interest rates will hold sway over investors.
On Aug. 16, New York Fed president William Dudley, said that he believed a rate hike “is possible” at the September 20-21 policy meeting.
After closing on the red on Wednesday, the JPY has taken hold of the 102 handle on Thursday, dodging the one-week lows against the dollar amid doubts that possible further easing by the Bank of Japan would cause a significant downside for the currency. Most notably, retail sales, core retail sales, the Producer Price Index, and industrial production were all significantly lower than expected.
Oil prices edged up as short-covering stemmed a two-day rout, but a stronger dollar stemmed gains.
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Both Brent crude LCOc1 and USA crude CLc1 retreated 0.5 percent to $46.35 and $43.68 a barrel, respectively. USA crude retreated 0.6 percent to $43.66, poised to end the week down 4.8 percent. In the last six trading sessions, the benchmark S&P 500 has moved at least 1 percent four times, twice up and twice down, whipsawed by shifting perceptions of what the Fed may do.
