Marketmind: Prices, rates, rates

Marketmind: Prices, rates, rates

(Reuters) – A look at the coming day in Asian markets from Jamie McGovern

Interest rate decisions from the Federal Reserve, the People’s Bank of China, and the Bank of Japan – next week isn’t much bigger than that, and it couldn’t come at a more critical time for Asian and global markets.

Investors ran for the hills last week, as repricing of US interest rates sent a surprise hike, crushing stocks and bonds, sending the dollar higher, and dramatically tightening financial conditions.

It’s not just about the levels you find many of the same major bond yields and exchange rates at, but how quickly you got there. Six weeks ago, the two-year US Treasury yield was around 2.80%. On Friday it rose above 3.90%.

The Fed is widely expected to raise interest rates by another 75 basis points on Wednesday, with an external chance of 100 basis points. There is much greater uncertainty surrounding the People’s Bank of China (PBOC) and the Bank of Japan (BOJ), both seeing the dollar depreciate their exchange rates.

The Bank of Japan issued warning noises that it could intervene in the foreign exchange market to support the yen, which has fallen to a 24-year low. It is also under increasing pressure to drop the very loose ‘yield curve control’ policy that is fueling the weak yen.

Meanwhile, the People’s Bank of China (PBOC) faces the yuan’s slide to a two-year low through 7.00 per dollar, but is under mounting pressure to inject stimulus into a fragile economy wracked by a bloated and struggling real estate sector.

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Tough decisions in the most difficult times. Given how nervous investors are at the moment, it is difficult to see what might stop corruption and revive the fortunes of the yen and yuan.

Interest rate decisions from the Philippines and Indonesia later in the week, and policy meeting minutes from the Reserve Bank of Australia, will help guide these currencies as well. But the three big guns will call for shots.

Key developments that should provide further guidance to the markets on Monday:

British Prime Minister Truss meets President Biden

De Guindos speaks from the European Central Bank

US NAHB Housing Data (September)

China FDI (August)

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