Asian Stocks Climb as Yen Steadies Amid U.S. Fed Rate Comments

Asian stocks

Asian stocks rose as the yen steadied after breaking through 100 against the dollar and investors weighed the prospects for higher rates this year.

The MSCI Asia Pacific Index rose 0.1 percent to 139.69 as of 9:10 a.m. in Tokyo. Japan’s Topix index climbed 0.3 percent as the yen retreated against the dollar after briefly touching 99.54 on Tuesday. New York Fed President William Dudley said the central bank could potentially raise interest rates as soon as next month, warning investors that they are underestimating the likelihood of increases in borrowing costs.

“Considering how much the yen has strengthened, Japanese shares are showing resilience,” said Chihiro Ohta, a senior strategist with SMBC Nikko Securities Inc. “However, there aren’t any reasons to actively buy Japanese stocks right now.”

Asian equities have climbed 23 percent from their February low through Tuesday as lackluster data from the world’s biggest economies fueled speculation central banks will continue to support them with stimulus and loose monetary policy. While the odds the Fed will raise rates in December climbed to 51 percent on Tuesday, from 45 percent the previous day, traders are betting there’s only a 22 percent chance of tightening next month, data compiled by Bloomberg showed.

Yen Strength

Investors also weighed the policy response from the Bank of Japan as the yen surpassed 100 per dollar for the second time this year. Strategists at Bank of Tokyo-Mitsubishi UFJ Ltd. and Morgan Stanley see the yen extending this year’s 20 percent gain versus the dollar, further confounding policy makers who are seeking to spur growth and inflation in the world’s third-largest economy. As the currency surged Tuesday, Japanese Vice Finance Minister Masatsugu Asakawa said he’s watching with concern to see if there are speculative moves in the foreign-exchange market.

The “Japanese economy is extremely weak,” Perpetual’s Sherwood said. “Helicopter money could be in play as Japanese policy makers run out of ammunition.”

South Korea’s Kospi index was little changed. Australia’s S&P/ASX 200 Index fell 0.2 percent. New Zealand’s S&P/NZX 50 Index climbed 0.6 percent. Markets in China and Hong Kong have yet to start trading.

China Retreat

Futures on the FTSE China A50 Index added 0.3 percent in most recent trading, while those on the Hang Seng Index rose 0.1 percent. The Shanghai Composite Index slipped 0.5 percent on Tuesday, after advancing above its 200-day moving average for the first time in a year as volume rebounded. While the gauge has climbed 17 percent from its January low, it’s still down 40 percent from last year’s peak.

China’s regulators took another step toward opening their financial markets on Tuesday, unveiling a second channel for foreign investors to buy the country’s stocks while also lifting restrictions on asset flows. The trading link between Hong Kong and Shenzhen is expected to start in about four months.

The long-delayed second link, which had been expected for more than a year, is part of China’s efforts to internationalize its capital markets and increase its global influence to something more in line with the heft of the nation’s economy. Barriers to foreigners wanting to trade the $6.5 trillion of mainland equities were one of the reasons that MSCI Inc. decided not to include the shares in its global benchmark indexes in June. Authorities in Beijing have also kept tight control over how much money leaves the country.

Futures on the S&P 500 Index rose 0.1 percent. The U.S. equity benchmark index slipped 0.6 percent on Tuesday.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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