In Japan, negative rates have fueled the yen (not expected) and created problems for banks, which now need to pay interest on deposits they hold.
Advertisement
Trading was also choppy elsewhere in Asia.
Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
The benchmark Nikkei average plunged below 17,000 on the Tokyo Stock Exchange on Thursday, hit by heavy selling due to disappointment over the Bank of Japan’s decision not to ease its monetary policy further.
The euro continued its climb against the U.S. dollar, at one point hitting US$1.1459, its highest level in more than two weeks.
At a two-day rate review ending yesterday, the BoJ made a decision to maintain its pledge to increase base money at an annual pace of 80 trillion yen (US$732bil) by a 8-1 vote.
BoJ, on other hand, had a nasty surprise waiting for the markets which had expected Japan to add to its stimulus package of United States dollars 732 billion, given how the country was in a deep funk.
With both the Federal Open Market Committee and Bank of Japan making interest rate decisions this week, the USD/JPY exchange rate is forecast to see significant volatility.. The euro dropped to 121.75 yen from 122.76 yen.
Amazon sweetened the mood a little after the close by blowing away earnings expectations for its first quarter, sending the stock up nearly 13 percent. Hong Kong’s Hang Seng index gained 1.2 percent to 21,611.16 while the Shanghai Composite Index in mainland China was flat at 2,952.75. The Standard & Poor’s 500 index rose 0.2 percent to 2,095.15.
The greenback weakened versus all of its major peers as data showed US gross domestic product expanded in the first quarter at the slowest pace in two years. The euro was steady at $1.1301.US crude futures were down 0.2 percent in early Asian trading at $45.17 a barrel, after hitting their 2016 high of $45.62 following the Fed’s decision. Brent crude, the global standard, lost 47 cents to $46.71 a barrel in London. Facebook fell 0.24 per cent to $116.45 yesterday.
Brent crude trimmed gains after its biggest monthly rise in seven years.
USA stock futures – the S&P, Nasdaq and Dow Jones – were also down over 0.4 percent at 6:32 a.m. EDT.
Advertisement
But a year on from a German government bond sell-off that rocked markets, and with US stocks at record highs and the USA economy showing signs of weakening, there are also some concerns that May could bring another global market wobble.
