Helter-skelter yen, US tech tonic

Asian stocks should open on Monday buoyed by Friday’s tech-led surge on Wall Street, while investors will be scrambling to make sense of the latest twist in the Japanese yen’s extraordinary helter-skelter slide against the dollar and other currencies.

The yen fell to a fresh 34-year low of 157.79 per dollar on Friday after the Bank of Japan left interest rates on hold, as expected, but failed to signal any meaningful concern about the exchange rate.

With the Ministry of Finance still opting not to authorize yen-buying intervention by the BOJ, traders went in full steam. Levels that until recently had been unthinkable, like 160 per dollar or even 170, are no longer so fanciful.

Most observers would probably have expected Tokyo to act by now. It last intervened in September and October 2022 when the dollar was around 146.00 and 152.00 yen, respectively.

But it hasn’t, and there are good reasons for that: contrasting U.S. and Japanese inflation data, yawning U.S.-Japanese yield differentials, and the benefits of weak yen to Japan’s asset markets, corporate profits, tourism, and all-round competitiveness.

On the other hand, speculators are licking their lips. The latest U.S. futures market data on Friday showed that hedge funds are sitting on their largest short yen position in 17 years and second-largest ever.

These CFTC figures are for the week through last Tuesday, and the yen has fallen another 2% since then.

Japanese officials have expressed their disquiet with the yen’s weakness, but the longer that talk is not backed up with action, the more hollow it rings. Will traders have 160.00 dollar/yen in their sights this week? You would think so.

Other countries in Asia are becoming increasingly uncomfortable with exchange rate developments – Indonesia has raised rates to counter the rupiah’s weakness, Vietnam and India have intervened directly in the FX market buying their currencies, and South Korea has indicated it will follow suit.

Looking to the week ahead, the U.S. Federal Reserve’s policy decision on Wednesday may tempt FX and other markets to play it safe for the next few days.

Stocks appear to have shaken off the wobbles after post-earnings rallies in Alphabet and Tesla shares, in particular, boosted a broader recovery on Wall Street. The S&P 500 has recouped half its losses from earlier this month, the Nasdaq and MSCI Asia ex-Japan even more.

Highlights from the Asian economic calendar this week include Chinese PMIs, Bank of Korea meeting minutes, inflation from South Korea and Indonesia, and Hong Kong GDP.

Figures on Saturday from Beijing, meanwhile, showed that industrial profits in China fell 3.5% in March, slowing the cumulative rise in the quarter to 4.3% from 10.2% in the first two months of the year.

Also in China, Tesla CEO Elon Musk on Sunday arrived on an unannounced visit in Beijing, where he met Premier Li Qiang.

Here are key developments that could provide more direction to markets on Monday:

– Thailand trade (March)

– Singapore unemployment (Q1)

– Singapore business expectations (Q1)

(Reporting and Writing by Jamie McGeever)

Oil prices rise as US official eases market concerns over economic headwinds

Oil prices rose in early trade on Friday, as players took stock of the US Treasury secretary’s comments that the country’s economy is likely in a stronger position than indicated by weak first-quarter data, coupled with supply concerns as conflict continues in the Middle East.

Brent crude futures gained 34 cents, or 0.38%, to USD 89.35 a barrel at 1211 GMT, and US West Texas Intermediate crude futures rose by 33 cents, or 0.39%, to USD 83.90 a barrel.

Treasury Secretary Janet Yellen told Reuters on Thursday that US economic growth was likely stronger than suggested by weaker-than-expected quarterly data.

Yellen said US GDP growth for the first quarter could be revised higher after more data is in hand, and inflation will ease to more normal levels after a clutch of “peculiar” factors held the economy to its weakest showing in nearly two years.

Data showed that economic growth slowed in the first quarter, and before Yellen’s comments, tremors from an acceleration in inflation had weighed on oil prices as investors calculated that the Federal Reserve would not cut interest rates before September.

Personal consumption expenditures (PCE) inflation data for March will be released on Friday, closely tracked by the Fed for its 2% target.

Elsewhere, supply concerns as geopolitical tensions continue in the Middle East also buoyed prices early in the session.

Israel stepped up airstrikes on Rafah after saying it would evacuate civilians from the southern Gazan city and launch an all-out assault despite allies’ warnings this could cause mass casualties.

(Reporting by Georgina McCartney in Houston; Editing by Leslie Adler)

Yen at its weakest in decades as BOJ meets

SINGAPORE – The yen was parked by a 34-year low on the dollar and decade lows on other crosses ahead of a Bank of Japan meeting where interest rates are expected to stay low, while the dollar dipped elsewhere on softer-than-expected US growth data.

The euro rose 0.3% overnight to a two-week high of USD 1.0728 following data showing the US had grown at its slowest pace in nearly two years in the first quarter. The annualized rate of 1.6% missed economist forecasts of 2.4%.

The Australian dollar, which has been boosted by a hotter-than-expected inflation reading this week, briefly topped its 200-day moving average to hit USD 0.6539, before settling to USD 0.6522 in Asia trade on Friday.

The yen, however, fell to its weakest since 1990 at 155.75 per dollar, tracking a sharp rise in US yields as separate figures showed a surge in an inflation measure.

That opened – at the 10-year tenor – a 380 basis point gap over Japanese yields that can be expected to stay wide with US rate cut expectations evaporating and markets now pricing only 34 basis points of cuts in 2024.

The size and persistence of the yield gap have encouraged short yen positions and driven Japanese money into dollar assets such as Treasuries, weighing on the currency.

The yen has slipped past levels at 152 and 155 to the dollar where traders had been wary of pushback or intervention from officials and was last trading at 155.58 per dollar.

Japanese Finance Minister Shunichi Suzuki said on Friday he was closely watching currency moves and prepared to take full steps in response. Short yen positions hit their largest for 17 years last week.

On Thursday the yen made a near 16-year low of 167.06 per euro, and was near those levels in the Asia morning on Friday, and it touched a nine-and-a-half year low of 101.64 to the Aussie dollar.

The Bank of Japan already hiked rates at a landmark meeting in March where it ended years of negative interest rates.

Market expectations are low for any fresh policy shift on Friday, but are keenly watching for changes to inflation projections – which would broadcast an intent to hike rates – or to any guidance on the interest rate outlook.

“The market is not pricing in much from this meeting but it’s important to watch where they set official inflation targets, and whether they revise their forecast,” said Nathan Swami, Citi’s Asia-Pacific head of FX trading in Singapore.

“I’m expecting them to, which then opens up the summer meetings as live.”

Sterling rose 0.4% overnight and was last at USD 1.2507. The New Zealand dollar was a touch firmer in Asia morning trade at USD 0.5960 and has gained in the previous four sessions.

(Reporting by Tom Westbrook; Editing by Christopher Cushing)

Yellen says currency intervention acceptable only in rare situations

WASHINGTON – US Treasury Secretary Janet Yellen said on Thursday the strong dollar reflected the strength of the US economy and high interest rates, insisting that interventions by governments in currency markets were acceptable only in rare circumstances.

Yellen, speaking in an interview with Reuters, acknowledged the strength of the dollar and divergences with other countries, but said the dollar’s rise reflected “the strength of the US economy and the level of interest rates.”

The former chair of the Federal Reserve declined to comment on a possible intervention by Japan to support the yen, which set a 34-year low against the dollar on Thursday, or to state her views on the current level of the yen.

“Our expectation of all major countries – and this is a G7 commitment – is that exchange rates will be market-determined,” Yellen said, adding that the goal was to ensure that market interventions to deal with disorderly markets or excessive volatility would occur only rarely and be consulted in advance.

Yellen’s remarks came in an interview with Reuters and followed a trilateral statement last week with the finance ministers of Japan and South Korea centered on the weakness of the two key trading partners’ currencies.

The three ministers, in a rare warning, said they agreed to “consult closely” on foreign exchange markets, acknowledging concerns from Tokyo and Seoul over their currencies’ recent sharp declines.

Receding expectations of a near-term US interest rate cut have pushed the yen to its weakest in more than three decades, keeping markets on alert for the chance of an intervention by Japan to prop up the currency.

Some analysts said Washington’s acknowledgment of the currency concerns from Tokyo and Seoul may lay the groundwork for intervention.

(Reporting by Alessandra Galloni, Andrea Shalal, and David Lawder; Writing by Dan Burns; Editing by Andrea Ricci)

Gold gains despite higher US Treasury yields, weaker dollar lends support

Gold prices firmed on a weaker dollar on Thursday, even as US Treasury yields rose after economic data showed signs of persistent inflation, lowering hopes of the Federal Reserve cutting interest rates anytime soon.

Spot gold rose 0.8% to USD 2,333.79 per ounce by 2:07 p.m. ET (1807 GMT). Prices were down nearly USD 100 from an all-time high of USD 2,431.29 scaled on April 12, fueled by geopolitical turmoil.

US gold futures settled 0.2% higher at USD 2,342.5.

The dollar eased in tight seesaw trade after data showed that US economic growth slowed more than expected in the first quarter, but an increase in inflation suggested the Fed would not cut interest rates before September.

“Gold is trading on the additional data point that shows that the Fed is not in a position to cut rates anytime soon,” said Bob Haberkorn, senior market strategist at RJO Futures.

US Treasury yields hit more than five-month highs after the data was released.

Gold is traditionally known as an inflation hedge, but elevated interest rates reduce the allure of holding non-yielding bullion.

“After a very dramatic move higher in gold over the course of the last several weeks, it is in the midst of a consolidation,” said David Meger, director of metals trading at High Ridge Futures.

“Certainly that could change in the short term if we see an inflationary print that comes out very benign and inflation is much more reduced.”

The March core Personal Consumption Expenditures Price Index (PCE) data is due on Friday.

Meanwhile, top consumer China’s net gold imports via Hong Kong jumped 40% in March from the previous month, data showed.

Spot silver gained 0.7% to USD 27.36 per ounce.

Platinum added 1.5% to USD 915.75, palladium lost 1.7% to USD 983.75.

BHP Group said it will offer Anglo American’s shareholders a premium of 31%, and carve out the London-listed group’s iron ore and platinum assets in South Africa, where the world’s largest listed miner has no activities.

(Reporting by Ashitha Shivaprasad and Anjana Anil in Bengaluru; Editing by Krishna Chandra Eluri and Alan Barona)

Bank of Japan center stage, US tech supports

Asia’s market spotlight on Friday falls on the Bank of Japan’s policy announcement, as the cat-and-mouse game of when or if Tokyo intervenes in the currency market continues, and investors digest the latest US mega tech earnings reports.

The BOJ decision and guidance from Governor Kazuo Ueda top the regional calendar, which also includes Tokyo consumer price inflation for April, producer price inflation from Australia, and industrial production from Singapore.

Investor sentiment and overall risk appetite in early Asian trade on Friday will be determined in large part by the results from Microsoft, Alphabet and Intel reported after the closing bell on Wall Street on Thursday.

Microsoft and Google parent Alphabet were resounding beats. Shares in Alphabet jumped as much as 14% and Microsoft 6% in after-hours trading, but Intel shares slumped as much as 7%.

Risk appetite was dealt a heavy blow on Thursday by surprisingly high US inflation and soft GDP growth numbers, and the leap in bond yields to new highs for the year will do little to improve the mood in Asia and across emerging markets.

On the other hand, US stocks on Thursday closed off their lows and after-hours earnings were mostly upbeat. If Asian stocks hold the line on Friday, they will register their best week since July last year.

All eyes, however, are on Tokyo, where the BOJ is expected to keep its key interest rate on hold and project inflation to stay near its 2% target in coming years on prospects of steady wage gains.

But the yen’s slide to a fresh 34-year low against the dollar means Ueda will have to walk a delicate line in maintaining a steady, calibrated path to exiting ultra-easy policy while at the same time addressing the huge pressure bearing down on the currency.

Erring too dovish risks pouring even more fuel on the current yen-selling flames, while an overly hawkish stance could threaten GDP growth and spark unwanted volatility in financial markets.

One option policymakers are considering, according to Jiji news agency, is weighing up measures to reduce the central bank’s government bond purchases. This would likely push down the BOJ’s bond holdings, ushering in a phase of quantitative tightening, Jiji said.

The yen goes into the BOJ decision at a 34-year low well below 155.00 per dollar and down 9% this year, Once again, it is on the defensive against other Asian currencies, much to the likely displeasure of policymakers in capitals across the continent.

In an interview with Reuters on Thursday US Treasury Secretary Janet Yellen sidestepped the issue of Japanese intervention, but said such instances should ideally be rare and only in response to excessive volatility.

Here are key developments that could provide more direction to markets on Friday:

– Bank of Japan policy announcement

– Japan Tokyo inflation (April)

– Australia PPI inflation (Q1)

(Reporting and Writing by Jamie McGeever; Editing by Josie Kao)

Gold little changed as spotlight shifts to US data

Gold prices steadied on Wednesday as risk premiums over tensions in the Middle East eased, while investors strapped in for U.S. economic data due later in the week that could offer clues to the Federal Reserve’s interest rate path.

Spot gold was flat at USD 2,322.09 per ounce by 1:45 p.m. ET (1745 GMT), after having hit its lowest since April 5 in the previous session. U.S. gold futures GCcv1 settled 0.2% lower at USD 2,338.4.

Spot silver dipped 0.2% to USD 27.23.

Bullion prices have fallen over USD 100 after hitting a record high of USD 2,431.29 on April 12.

The dollar index firmed 0.2%, making greenback-priced bullion less attractive to overseas buyers.

“The gold and silver market is seeing correction with a de-escalation in the Middle East conflict. The key question is if these corrections will turn into near-term price downtrend that would signal market tops are in place,” said Jim Wyckoff, senior analyst at Kitco Metals.

“Market focus is back on economic reports and the Fed. If we see hot inflation data, then it is going to be harder for Fed to cut rates and gold could drop to below USD 2,200.”

The U.S. gross domestic product (GDP) data is due on Thursday and the Personal Consumption Expenditures (PCE) report on Friday.

Traders now expect the first Fed rate cut to come, most likely in September. Higher interest rates reduce the appeal of holding non-yielding gold.

In the long term, gold will rise further, with 2024 being an election year, persistent geopolitical conflict and increasing U.S. debt, said Jonathan Rose, Genesis Gold Group CEO.

“Central banks have a monstrous appetite for gold right now, and that is definitely not slowing down,” he added.

Platinum lost 0.1% to USD 906.95, while palladium plunged 1.7% lower to USD 1,002.42.

“Both (platinum and palladium) metals have been under pressure as consumers draw down on inventories. However, palladium will be harder hit amid rising electric vehicle sales due to its limited uses elsewhere,” ANZ analysts wrote in a note.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Tasim Zahid and Krishna Chandra Eluri)

Equities mixed as investors eye earnings; yen on intervention watch

NEW YORK/LONDON – US and European shares finished mixed on Wednesday ahead of more corporate earnings this week, and the yen was mired near 34-year lows, keeping traders wary of intervention from Japan.

An auction of a record USD 70 billion worth of five-year US Treasury notes on Wednesday helped to push bond yields higher, pressuring equities.

MSCI’s gauge of stocks across the globe rose 1.31 points, or 0.17%, to 759.46.

On Wall Street, the S&P 500 closed slightly higher after choppy trading.

Europe’s broad STOXX 600 index closed down 0.5% as financial stocks dragged the index off a more than one-week peak.

The S&P 500 gained 1.08 points, or 0.02%, to 5,071.63 and the Nasdaq Composite gained 16.11 points, or 0.10%, to 15,712.75. The Dow Jones Industrial Average fell 42.77 points, or 0.11%, to 38,460.92.

“This week is getting back to market fundamentals and earnings. At least temporarily, we are sidestepping geopolitics which have been impacting markets in the last two weeks,” said Samy Chaar, chief economist at Lombard Odier.

Spot gold continued its slide, trading down 0.26% to USD 2,315.82 an ounce. US gold futures GCcv1 settled 0.2% lower at USD 2,338.4.

DATA DIVERGENCE

Purchasing Managers Index surveys on Tuesday showed overall business activity in the eurozone and in Britain expanded at their fastest pace in nearly a year, while business activity cooled in the US

That divergence helped the euro nudge above USD 1.07 in Asia trade, its highest in more than a week.

“For once, US-eurozone divergence in data has come to the benefit of euro/dollar,” said Francesco Pesole, currency strategist at ING, in a note.

“(Though) hard data – inflation and employment above all – has been the real drag on the pair so far, so caution is warranted when it comes to rallies prompted by activity surveys like PMIs.”

US gross domestic product and March personal consumption expenditure data due later this week will be crucial for the dollar and for investors’ attempts to gauge the path of US rates.

Traders expect the Federal Reserve to start easing rates in September and end the year with 42 basis points of cuts, down from previous bets for 150 bps.

“One thing is for sure: the Fed is not raising rates. I believe they want to tighten financial conditions by communicating a further distance is required for cuts, but they can do those cuts at whatever speed is necessary,” said Jamie Cox, managing partner for Harris Financial Group in Richmond, Virginia.

INTERVENTION ZONE

The drastic shift in rate expectations has elevated Treasury yields and lifted the dollar in the past few weeks, with pressure felt particularly in Asia.

In the latest illustration, Indonesia’s central bank delivered a surprise rate hike on Wednesday, stepping up efforts to support the rupiah currency.

The Japanese yen weakened 0.09% against the greenback at 154.95 per dollar and touched its lowest since 1990 ahead of the Bank of Japan’s two-day policy meeting that concludes on Friday.

A senior official of Japan’s ruling party told Reuters they were not yet in active discussion on what yen levels would be deemed worthy of market intervention.

The benchmark 10-year Treasury note rose five basis points to 4.6459%.

In commodities, Brent crude futures fell 40 cents, or 0.45%, to settle at USD 88.02 a barrel, while US West Texas Intermediate crude futures slipped 55 cents, or 0.66%, to USD 82.81.

(Reporting by Ankur Banerjee and Alun John; Editing by Muralikumar Anantharaman, Kim Coghill, Alex Richardson, Christina Fincher, David Gregorio, Richard Chang, and Sonali Paul)

Yields rise before data, five-year auction sees solid demand

US government bond yields gained on Wednesday as traders waited on key economic releases on Thursday and Friday for further clues on Federal Reserve policy, while the US Treasury saw solid demand for an auction of five-year notes.

The main economic focus this week will be first-quarter gross domestic product data on Thursday and personal consumption expenditures (PCE) for March on Friday. They come after a hotter-than-expected consumer price inflation report for March pushed back expectations of when the Fed will begin cutting interest rates.

Markets are “looking to see how robust growth really was in the first quarter given the really strong growth data we’ve seen and resilient, or re-accelerating, inflation prints as well,” said Angelo Manolatos, macro strategist at Wells Fargo in New York.

Meanwhile “next week is the big week,” for markets, Manolatos added. Events include the Treasury Department’s refunding announcement for the coming quarter, the Fed’s April 30-May 1 meeting and the April employment report.

Traders are watching economic indicators for more insight into when inflation will recede closer to the US central bank’s 2% annual target. Many economists have also anticipated a slowing economy, though recent economic data has been unexpectedly strong.

Fed policymakers, including Chair Jerome Powell, last week backed away from providing any guidance on when interest rates may be cut, saying instead that monetary policy needs to be restrictive for longer.

The Treasury saw good demand for a record USD 70 billion auction of five-year notes on Wednesday. The debt sold at a high yield of 4.659%, around half a basis point above where it had traded before the sale. Demand was 2.39 times the amount of notes on offer, slightly below the bid-to-cover ratio of 2.41 times for the last two auctions.

The government drew strong demand for a USD 69 billion auction of two-year notes on Tuesday and will also sell USD 44 billion in seven-year notes on Thursday.

Benchmark 10-year Treasury note yields rose five basis points to 4.646%, holding below the 4.696% level reached on April 16 which if broken would mark the highest since early November. Two-year yields gained three basis points to 4.933%. They reached 5.012% on April 11, the highest since mid-November.

The inversion in the yield curve between two- and 10-year notes narrowed two basis points to minus 29 basis points.

Fed funds futures traders are pricing in 43 basis points of easing this year and see the first cut as most likely in September. They had previously priced in three 25-basis-point rate cuts this year, beginning in June.

(Reporting By Karen Brettell; Editing by Kirsten Donovan and Marguerita Choy)

Oil settles lower as US business activity cools, concerns over Middle East ease

NEW YORK – Oil prices fell on Wednesday as worries over conflict in the Middle East eased and business activity in the United States slowed, although a fall in US crude oil inventories put a floor on those losses.

Brent crude futures fell 40 cents, or 0.45%, to settle at USD 88.02 a barrel, while US West Texas Intermediate crude futures slipped 55 cents, or 0.66%, to USD 82.81.

That reversed some of Brent’s gains earlier in the week, buoyed by a weaker US dollar.

“It appears the fundamentals that we trade with are leaning towards a little settling down in the Middle East,” said Tim Snyder, economist at Matador Economics.

Perceived de-escalation between Iran and Israel could remove another USD 5-10 a barrel in coming months, Goldman Sachs analysts said in a note. These analysts estimated a USD 90 per barrel ceiling on Brent.

US crude stockpiles fell by 6.4 million barrels to 453.6 million barrels in the week ended April 19, the EIA said, compared with analysts’ expectations in a Reuters poll for a 825,000-barrel rise.

The large crude draw was the result of very high crude exports, said UBS analyst Giovanni Staunovo. But it could be a one-off, he said, as preliminary tanker tracking data this week shows lower exports.

US business activity cooled in April to a four-month low, with S&P Global saying on Tuesday that its flash Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 50.9 this month from 52.1 in March.

The US central bank is expected to start lowering rates this year, which could bolster economic growth and, in turn, stimulate demand for oil.

Elsewhere, Germany’s business morale improved more than expected in April, according to a survey on Wednesday, boosting hopes that the worst may be over for Europe’s biggest economy.

Even as concerns about geopolitical tension in the Middle East eased, the Israel-Hamas conflict continues to rage with some of the heaviest shelling in weeks on Tuesday. Sources on Wednesday said Israel was preparing to evacuate Rafah ahead of a promised assault on the city.

(Reporting by Nicole Jao in New York, Robert Harvey in London, Deep Vakil in Bengaluru, Katya Golubkova in Tokyo and Trixie Yap in Singapore; Editing by Kirsten Donovan, Alexandra Hudson, Andrea Ricci, Emelia Sithole-Matarise, and Peter Graff)

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