Japanese equities surged on Wednesday as the yen depreciated to its weakest level since 1990. However, Chinese markets experienced a decline, contributing to a lack of clear direction in regional stocks amidst a truncated trading week, culminating in a pivotal U.S. inflation data release.
The Nikkei in Japan concluded the session with a 0.9% gain, reaching 40,762.73, approaching the recent all-time high achieved last Friday at 41,087.75.
The yen’s descent to 151.975 against the dollar prompted immediate concern from Japan’s finance minister, who hinted at potential intervention measures—a phrase reminiscent of late 2022, preceding yen-buying interventions.
Despite the Bank of Japan’s recent interest rate hike, the yen’s persistent weakening persists, reflecting traders’ anticipation of gradual tightening and potential delays in Federal Reserve easing.
BOJ board member Naoki Tamura reinforced this cautious stance on Wednesday, advocating for a gradual approach to policy normalization.
Conversely, Hong Kong’s Hang Seng index declined by 1%, while mainland Chinese blue chips retreated approximately 0.7%, reversing previous gains.
Overall, MSCI’s broadest index of Asia-Pacific shares edged up by 0.1%, but excluding Japanese shares led to a marginal 0.17% decline.
Market sentiment remains turbulent and directionless, attributed partly to quarterly rebalancing flows and the anticipation surrounding key events, including the release of the U.S. Federal Reserve’s favored inflation metric and public remarks from Fed Chair Jerome Powell, scheduled for Friday—a day marked by holiday closures in most markets.
The U.S. dollar index, gauging the currency against six major peers, including the yen, saw a slight uptick to 104.36, nearing Friday’s five-week peak.
Amidst concerns over divergent policy stances between the BOJ and the Fed, potential intervention in the USD/JPY exchange rate could materialize if the pair dips below 150.00.
In the currency markets, the euro held steady at $1.08285, while sterling dipped to $1.26175.
Long-term U.S. Treasury yields remained stable at 4.23%, as traders speculated on potential rate cuts by major central banks, including the Fed, ECB, or Bank of England.
Crude oil prices experienced a second consecutive day of decline following reports of a surge in U.S. crude stockpiles and indications of unchanged output policies by major producers.
Brent crude futures for May delivery dropped to $85.51 a barrel, while U.S. West Texas Intermediate (WTI) crude futures for May delivery fell to $80.98.