A passerby walks past an electric monitor displaying the stock price index of various countries in front of a bank in Tokyo, Japan, March 22, 2023. Portal/Issei Kato/File Photo ACKNOWLEDGE RIGHTS
SINGAPORE, Oct 3 (Portal) – Asian shares fell to their one-year lows on Tuesday as markets were gripped by worries about longer-term higher U.S. interest rates, while the yen hovered near a one-year low, alerting traders to possible intervention drew attention.
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 1.6% to its lowest level since November 28, 2022. Japan’s Nikkei (.N225) fell 1.8%, while Hong Kong’s Hang Seng Index ( .HSI) fell by 3%. . Chinese markets were closed this week due to the Golden Week holiday.
Futures suggested European stocks would open lower: Eurostoxx 50 futures lost 0.58%, German DAX futures lost 0.60% and FTSE futures lost 0.31%.
Federal Reserve officials said monetary policy would need to remain tight “for some time” to bring inflation back to the central bank’s 2 percent target.
“I remain prepared to support a rate hike at a future meeting if incoming data suggests that progress on inflation is stalling or is too slow to bring inflation to 2% in a timely manner,” said Fed Governor Michelle Bowman on Monday prepared remarks at a banking conference.
Still, Fed officials’ hawkish rhetoric comes as ongoing debate rages over another possible rate hike this year.
Fed fund futures traders are pricing in a 26 percent chance of a rate hike in November and a 45 percent chance of a rate hike by December, according to CME Group’s FedWatch Tool.
“We are continuing this narrative for the longer term,” says Rob Carnell, head of research for Asia Pacific at ING. “Higher bond yields and a stronger dollar are the dominant story right now.”
Australia’s S&P/ASX 200 index (.AXJO) fell 1.3% while the Australian dollar fell 0.77% to $0.631 after the Reserve Bank of Australia on Tuesday kept interest rates stable for a fourth month had held and showed no urgency for a further increase.
However, the central bank reiterated its warning that further tightening may be needed to contain inflation in an “appropriate timeframe.”
YEN POWER
In the foreign exchange market, focus remains on the Japanese yen as the currency approaches 150 per dollar – a level that traders are speculating could prompt authorities to intervene.
The yen was last at 149.89 per dollar in Asian hours, after hitting a new near 12-month low of 149.935 during the session.
Last September, Japanese authorities made their first intervention in 24 years as the yen weakened above 145 per dollar, and speculation has mounted that they will intervene again while the yen is under constant pressure due to a yawning yield gap against the dollar Pressure is on.
Japanese Finance Minister Shunichi Suzuki said on Tuesday that authorities are closely monitoring the foreign exchange market and are ready to respond, repeating his warning against speculative moves that do not reflect economic fundamentals.
“(It) feels like people have accepted that there might be a real intervention if they go much higher,” ING’s Carnell said. “It (the dollar-yen pair) is still drifting higher. Just at a very, very glacial pace.”
The dollar index, which measures the U.S. currency against six major rivals, rose 0.168% to hit a new 10-month high.
The 10-year Treasury yield rose 0.2 basis point to 4.685%, after hitting 4.703% in Monday’s session, its highest level since October 2007. Yields got a boost after a deal to avert a partial U.S. government shutdown reduced demand for the debt ahead of key jobs data this week.
U.S. crude fell 0.84% to $88.07 a barrel and Brent settled at $89.76, down 1.05% on the day.
Meanwhile, spot gold prices fell 0.5% to $1,818.10 an ounce. U.S. gold futures fell 0.56% to $1,819.80 an ounce.
Reporting by Ankur Banerjee; Editing by Jamie Freed
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