Fri Sep 20 08:35:01 UTC 2024: ## Asian Markets Surge Following US Rate Cut, Yen Reverses Early Gains After BoJ Holds Steady
**Tokyo, September 15, 2023** – Asian markets soared on Friday, building on a global rally fueled by the US Federal Reserve’s significant interest rate cut earlier this week. The yen, however, reversed initial gains after the Bank of Japan (BoJ) opted to hold borrowing costs steady.
The Fed’s decision to cut rates by 50 basis points – the first since the onset of the COVID-19 pandemic – sparked a wave of optimism among traders. Although some initially feared this move signaled economic concerns, data released on Thursday showed jobless claims at their lowest point since May, suggesting a potential “soft landing” for the US economy rather than a recession.
Wall Street responded enthusiastically to the Fed’s announcement, with the S&P 500 and Dow Jones reaching new record highs and the Nasdaq climbing over 2%. This momentum carried over to Asia, with Tokyo’s Nikkei index jumping over 1% and Hong Kong’s Hang Seng Index also gaining more than 1%. Sydney, Seoul, Taipei, Mumbai, Bangkok, and Manila all saw strong buying activity. Shanghai edged higher, but Wellington, Singapore, and Jakarta experienced declines.
Meanwhile, Frankfurt fell after hitting a record high the previous day, and London and Paris also saw losses.
The prospect of lower borrowing costs pushed gold to a fresh record high of $2,609.74, making the precious metal more appealing to investors.
With the Fed’s decision out of the way, attention turned to the BoJ, which kept borrowing costs on hold after its latest policy meeting. This move was widely anticipated following a rate hike at the previous meeting. However, investors are now scrutinizing the BoJ’s statement and comments from Governor Kazuo Ueda for guidance on its future plans.
The BoJ’s decision to move away from its long-standing policy of ultra-low rates in March – its first increase in 17 years – sent shockwaves through markets. A subsequent rate hike in July sparked a surge in the yen as investors unwound their “carry trade,” which involved using the cheap Japanese currency to buy higher-yielding assets.
Expectations of further tightening by the BoJ, coupled with the Fed’s easing measures, pushed the yen to its strongest level since summer, trading below 140 per dollar this week. The yen strengthened to 141.74 per dollar following the BoJ announcement but later reversed to 143.77 in afternoon Asian trading.
The BoJ’s decision came just hours after figures showed the consumer price index (CPI) edged up to 2.8% in August, as expected. Masamichi Adachi, UBS Securities’ chief economist for Japan, stated that “we think it is reasonable to expect the next rate hike will be coming soon,” adding that “October is still possible, but elevated market nervousness and political developments make us think that the risk is more skewed to December than before.”
First Piper 