Asian Markets Cautious: Asian stocks started November with a touch of caution as investors awaited the Federal Reserve’s policy decision due later in the day. The yen remained near one-year lows against the dollar, sparking concerns of possible intervention by Tokyo.
The MSCI’s Asia-Pacific index, excluding Japan, began the month 0.13% lower. This came after three consecutive months of losses. In contrast, Japan’s Nikkei climbed by 2%, offering a bright spot in the region. However, China’s factory activity unexpectedly contracted in October, adding to concerns about the country’s economic recovery at the beginning of the fourth quarter.
Market attention in Asia was particularly focused on the yen after the Bank of Japan (BOJ) adjusted its bond yield control policy, which had a dovish impact. The yen weakened, touching a one-year low against the dollar and a 15-year low against the euro.
Market analyst Chris Weston noted, “Once again market players have been left frustrated by the lack of urgency shown by the BOJ, and either closed yen longs or flipped into outright yen shorts.”
Also Read: Asian Markets Rebound as Amazon Boosts Confidence Amid Easing Inflation
Japanese authorities remained vigilant, with Japan’s top currency diplomat, Masato Kanda, warning about the currency’s sharp moves and expressing readiness to respond.
The yen did strengthen slightly after Kanda’s comments but remained close to the one-year lows it reached. ING economists predicted that the market might test levels above 150 in the short term, and it could go beyond 152 depending on U.S. data and Federal Open Market Committee (FOMC) decisions.
Over in the United States, Wall Street closed higher, with a keen eye on the upcoming Fed policy decision. The Fed was expected to keep interest rates unchanged. All eyes were on Fed Chair Jerome Powell’s post-policy meeting comments for insights into the future path of interest rates.
Erik Weisman, Chief Economist and Portfolio Manager at MFS Investment Management, believed the Fed would maintain the possibility of future rate hikes until the labor market cools and inflationary pressures ease. He anticipated Powell arguing that the lagged effects of previous rate hikes have not fully impacted the economy and that patience was essential.
Treasury yields remained elevated, and the dollar showed strength. Sterling was slightly down, while oil prices inched higher, with the Israel-Hamas conflict closely monitored. Gold prices experienced a slight dip, remaining below the $2,000 level it briefly breached last month during a surge in safe-haven demand.