Asian markets fluctuated Friday as traders tried to track a Wall Street rally ahead of crucial US jobs data, while Tokyo took a hit from an extended yen rally on bets Japan will drop its ultra-loose monetary policy.
A volatile week looked set to end on a positive note as a series of figures indicated the US labour market and economy were slowing, fuelling speculation the US Federal Reserve will be able to cut interest rates in early 2024.
Hopes for a lower rate environment were behind a stock rally last month, though December has been a little tougher owing to worries the buying may have been overdone.
There is also some reticence among traders owing to concerns that the weaker economic readings suggest the world’s number one economy could tip into recession.
Friday’s figures come as inflation continues to come down and US job openings and private payrolls slowed in November.
“The jobs report is likely to provide additional indications of the labour market softening, a welcome sign for employers,” said Jose Torres 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.”
Wall Street’s three main indexes ended on a strong note, led by the Nasdaq as tech giants outperformed.
But Asia was unable to maintain the momentum, with Hong Kong and Shanghai fluctuating, while Sydney, Seoul, Singapore and Taipei rose and Wellington fell.
Tokyo was the key loser, dropping more than one percent as the yen continued its rampage against the dollar, which hurts exporters.
The currency surged almost four percent at one point Thursday after Bank of Japan boss Kazuo Ueda said handling monetary policy “will become even more challenging from the year-end and heading into next year”.
The remarks suggested the bank was on the brink of shifting away from its long-running ultra-loose monetary policy put in place to kickstart growth.
The comments were made a day after deputy governor Ryozo Himino played down the adverse consequences of such a move on the economy.
The yen strengthened to 141.71 per dollar at one point Thursday, compared with more than 147 earlier in the day.
The yen has been one of the year’s worst performers owing to the BoJ’s refusal to budge on policy even though most other central bank have hiked rates to battle inflation.
But it has regained some of its mojo as the Fed turns more dovish and Japanese policymakers more hawkish.
However, analysts said the rally may have gone too far and questioned whether the BoJ would make any big moves soon.
Its next policy decision comes later this month.
Analysts also said the big moves may have been down to short-sellers shifting out of their positions.
“The odds of tightening administered rates on December 19 are still a bit of a long shot,” said Bipan Rai of CIBC.
Monex USA’s Helen Given added: “We still don’t necessarily believe Ueda’s words will actually come to fruition.”
The latest move “looks a bit overdone to me”, she said, adding that she saw the currency ending the year at 146 to the greenback.
Key figures around 0230 GMT
Tokyo – Nikkei 225: DOWN 1.7 percent at 32,305.33 (break)
Hong Kong – Hang Seng Index: DOWN 0.4 percent at 16,275.13
Shanghai – Composite: UP 0.3 percent at 2,793.64
Dollar/yen: DOWN at 143.27 yen from 144.10 yen on Wednesday
Euro/dollar: UP at $1.0783 from $1.0797
Pound/dollar: UP at $1.2589 from $1.2587
Euro/pound: DOWN at 85.66 pence from 85.76 pence
West Texas Intermediate: UP 1.3 percent at $70.27 per barrel
Brent North Sea crude: UP 1.4 percent at $75.09 per barrel
New York – Dow: UP 0.2 percent at 36,117.38 (close)
London – FTSE 100: FLAT at 7,513.72 (close)
