People walk past a screen displaying the Hang Seng stock index in the Central District in Hong Kong, China, October 25, 2022. Portal/Lam Yik/File Photo Acquire LICENSE RIGHTS
SINGAPORE, Nov 14 (Portal) – Asian stocks rose slightly on Tuesday, ahead of a key U.S. inflation report that could have a big impact on the Federal Reserve’s policy outlook, while the fragile yen flirted with and hit 33-year lows brought into the intervention zone.
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) rose 0.23%, on track for a second straight day of gains.
The Japanese yen was at 151.71 per dollar in Asian hours, after hitting a one-year low of 151.92 on Monday. If the troubled currency falls below last year’s low of 151.94, it would hit a new 33-year low.
Japanese Finance Minister Shunichi Suzuki said on Tuesday that the government would take all necessary steps to respond to currency fluctuations, repeating his usual mantra that excessive fluctuations are undesirable.
European stocks are also likely to remain listless: Eurostoxx 50 futures fell 0.05%, German DAX futures fell 0.01% and FTSE futures fell 0.15%.
Investors are awaiting the U.S. inflation report later in the day after Federal Reserve Chairman Jerome Powell and other policymakers said they were still not sure whether interest rates would be high enough to contain inflation .
Economists polled by Portal expect headline U.S. consumer price inflation to have slowed to 3.3% in October from 3.7% in September, with the so-called core inflation rate, which strips out volatile components, unchanged at 4.1% .
“This data has a significant impact on the future policy direction of the Federal Reserve,” said Anderson Alves, a trader at ActivTrades.
“A miss, particularly in the less volatile core inflation component, could lead traders to believe the Fed could refrain from further rate hikes. Conversely, a hit could lead to a noticeable repricing of the short-term US yield curve.”
China’s stocks fell marginally, with the blue-chip CSI 300 index (.CSI300) falling 0.19%, while Hong Kong’s Hang Seng index (.HSI) fell ahead of a summit between leaders of the country’s two largest economies World gained 0.09% later this week.
The benchmark 10-year Treasury yield was 4.630%, slightly below Monday’s weekly high of 4.696%.
Markets largely accepted Moody’s move to downgrade its AAA credit rating outlook from stable to negative on Friday. Moody’s decision came after rival Fitch downgraded the U.S.’s top credit rating in August.
“With the presidential election just a year away, it is unlikely that the government will announce any significant proposals to address these issues as promising spending cuts and tax increases are unpopular,” said Gary Dugan, chief investment officer at Dalma Capital.
The United States faces another partial government shutdown starting Saturday if Congress does not pass an emergency solution bill.
YEN WATCH RESUME
The yen’s overall decline has traders again keeping an eye on whether Japanese authorities will intervene, with US inflation data likely to be the catalyst for the next big move.
Japan last intervened by selling dollars and buying yen in the foreign exchange market in October last year. Intervention data released last month showed authorities have since refrained from further such measures.
The currency has lost about 14% against the dollar so far this year.
The yen briefly rose against the dollar in New York on Monday after hitting its lowest point since the start of the year, which analysts attributed to brisk trading in options expiring this week.
Nicholas Chia, macro strategist at Standard Chartered, said the yen’s fluctuations suggested markets were worried about possible intervention, helping to curb excessive speculation.
“So in a sense, market participants are doing Treasury’s work for them as markets begin to question the price action behind a sudden drop in the dollar/yen,” he said.
The dollar index, which measures the U.S. currency against six rivals, rose 0.057% to 105.69. The index fell 1% in November and is on track to end its three-month winning streak.
Oil prices rose slightly after an OPEC report said market fundamentals remained strong. U.S. crude rose 0.27% to $78.47 a barrel and Brent was at $82.73, up 0.25% on the day.
Reporting by Ankur Banerjee. Editing by Shri Navaratnam and Miral Fahmy
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