Asian shares bathed in Fed lights, yen jittery ahead of BOJ by Reuters

By Stella Qiu

SYDNEY (Reuters) – Asian shares extended their gains on Friday, bathing in the wake of an excessive interest rate cut in the United States, while the yen was jittery ahead of a monetary policy decision in Japan as traders looked for hints of future tightening.

In China, the central bank kept its benchmark lending rates steady, dashing hopes of imminent policy support for its struggling economy. Chinese shares were an outlier, with the blue chip down 0.3% in early trade, while it was guided higher by a strong official fix.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent to its highest in two months and was on course for a 2.4 percent weekly gain.

It rose 1.9 percent, helped in part by a weaker yen as bulls took some profit from the recent rally to 14-month highs. It’s up 3.4% per week.

The Bank of Japan (BOJ) is expected to keep its short-term rate at 0.25%, although it will focus on any indications from Governor Kazuo Ueda on the timing and pace of further hikes at its post-meeting news conference.

The yen is already suffering significant losses, down 1% for the week at 142.28 per US dollar. Data earlier in the day showed that Japan’s core inflation accelerated for a fourth straight month, strengthening the case for further policy tightening.

“Today’s meeting is not expected to change the current monetary policy outlook, with the next BOJ rate hike expected in December,” said IG analyst Tony Sycamore.

“If Ueda were to place further emphasis on the bank’s positive outlook on prices and economic activity, it would likely be seen as a driver, potentially driving it back towards 140.00.”

Overnight, Wall Street finally had time to digest the Federal Reserve’s first interest rate cut. With more easing to come, investors are betting on continued US economic growth – better-than-expected jobless claims data added to the view that the labor market remained healthy.

Markets are implying a 40% chance the Fed will cut another 50 basis points in November and price it at 73 basis points by the end of the year. Rates are seen at 2.85% until the end of 2025, which is now considered to be the Fed’s neutral estimate.

US futures were slightly lower on Friday. And it rose to a record overnight, while the Nasdaq rose 2.5 percent, led by tech stocks. (.N)

In currency markets, the dollar was pegged near one-year lows against major currencies. Sterling held steady at $1.3281 after rising 0.7% overnight to its highest since March 2022 as the Bank of England kept rates steady.

Short-term US Treasuries held near two-year highs. Two-year Treasury yields fell 3 basis points on Friday, but were still flat for the week.

Commodities also held on to weekly gains. Gold neared a record high of $2,587.75 an ounce, and oil prices are set for a second straight week of gains.

Futures fell 0.3 percent to $74.69 a barrel, but were still up 4.2 percent this week. (OR)