Yen Gains On BOJ Bets, India Stocks Set For Record: Markets Wrap

(Bloomberg) -- The yen rose as traders ratcheted up bets that the Bank of Japan is nearing the end of its negative interest rate policy. (Bloomberg) -- The yen rose as traders ratcheted up bets that the Bank of Japan is nearing the end of its negative interest rate policy. Japan’s currency gained for a second day, surging as much as 1.1% in thin liquidity before paring much of its rise. The advance sent the nation’s stocks and bonds lower. Shares in South Korea and Taiwan rose after the Nasdaq 100 index rallied amid renewed optimism on artificial intelligence. “The exchange rate fluctuations have been quite dramatic, so it’s inevitable that Japanese stocks fall because of the yen appreciation,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. “Since a strong yen is not a bad thing for all Japanese companies, the decline in stocks is likely to be limited to a certain extent.” Indian stock benchmarks, already at record levels, added to gains after the central bank’s decision to keep its rate unchanged, as expected. The Sensex Index headed for a record high as it neared 70,000 and the Nifty 50 index topped 21,000 for the first time. Strong economic growth and a state election victory for Prime Minister Narendra Modi give policymakers little reason to consider interest rate cuts just yet. The policymakers also raised their GDP forecast for fiscal year 2024 to 7% from 6.5%. Meanwhile, traders will be on watch for any clarification from BOJ Governor Kazuo Ueda of comments he made to lawmakers that his job was going to get more challenging from the year-end, helping fuel speculation the central bank will start lifting its sub-zero benchmark rate soon. The yen reached its strongest level since August as bets against the currency capitulated. Some investors, however, are not convinced that the BOJ will make a significant shift in policy this month. Japan’s economy shrank more than expected in the third quarter, suggesting the recovery is more fragile than thought and may give policy makers reason to delay normalizing policy. The recent moves in the yen “certainly have been a surprise to us and we think markets are probably overshooting here,” Eddie Cheung, senior emerging markets strategist at Credit Agricole CIB, said on Bloomberg Television. “Around these levels though yen has overshot to the downside.” Waiting for Jobs Data Elsewhere in Asia, shares in Hong Kong and China reversed losses. Tencent Holdings Ltd., China’s most valuable company, on Friday revealed one of its most ambitious attempts at a big-budget console game as it bet that the new franchise will help its global expansion. The dollar traded mixed against major peers and Treasuries were little changed ahead of Friday’s US non-farm payrolls report as traders look for more evidence of a cooling labor market to assess the outcome of next week’s Federal Reserve policy meeting and solidify rate cut bets next year. “The jobs report is likely to provide additional indications of the labor market softening, a welcome sign for employers,” said Jose Torres, a senior economist at Interactive Brokers. “Its impact on markets, however, will depend on whether investors view the data as a stepping stone to a March rate cut and soft landing, or an adverse effect on consumer spending and a sharper economic slowdown.” In other markets, oil ticked higher but remained on course for the longest weekly losing streak since 2018 on concerns about a global glut. Gold headed for the first weekly drop in four weeks. WATCH: “2024 will be the story when Asian FX really begins to rally,” says Eddie Cheung, senior emerging market strategist at Credit Agricole CIB, as he discusses the outlook for Asian currencies.Source: Bloomberg Key events this week: Germany CPI, Friday US jobs report, University of Michigan consumer sentiment, Friday Some of the main moves in markets: Stocks S&P 500 futures were little changed as of 2:38 p.m. Tokyo time. The S&P 500 rose 0.8% Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 1.5% Euro Stoxx 50 futures rose 0.2% Japan’s Topix index fell 1.7% Hong Kong’s Hang Seng Index was little changed China’s Shanghai Composite Index rose 0.2% Australia’s S&P/ASX 200 Index rose 0.3% Currencies The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.0788 The Japanese yen rose 0.2% to 143.85 per dollar The offshore yuan was little changed at 7.1682 per dollar The Australian dollar rose 0.2% to $0.6615 The British pound was little changed at $1.2591 Cryptocurrencies Bitcoin was little changed at $43,411.15 Ether was little changed at $2,372.28 Bonds The yield on 10-year Treasuries was little changed at 4.15% Japan’s 10-year yield advanced one basis point to 0.760% Australia’s 10-year yield declined four basis points to 4.30% Commodities West Texas Intermediate crude rose 1.4% to $70.33 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation. --With assistance from Akemi Terukina, Winnie Hsu and Matthew Burgess. 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