(Reuters) – A look at Asian markets today from Louis Krauskow
A frenetic week of central bank activity around the world has left markets at an extreme.
Currency rates were shaken after Japan intervened in the foreign exchange market to buy the yen for the first time since 1998.
The yen rose against the dollar after the intervention. Some analysts were skeptical that the battered currency would remain strong given the loose monetary policy by the Bank of Japan, which contrasts with the hawkish moves by the Federal Reserve and other central banks this week. The US dollar weakened modestly against a basket of currencies on Thursday, but it was not far from a 20-year high.
The echoes of the Fed’s actions on Wednesday continued to reverberate. The US central bank raised interest rates by 75 basis points for the third consecutive meeting, and President Jerome Powell has been vocal about the “pain” that will occur as policymakers commit to taming four-decade-old high inflation.
US government debt yields rose to new highs on Thursday. US 2-year Treasury yields are at their highest since 2007, and benchmark 10-year yields are at their highest since 2011. The curve between these two maturities has inverted to its highest level since at least 2000, indicating growing fears about a recession imminent.
The prospect of an economic downturn weighed on stocks. The MSCI gauge of stocks around the world touched its lowest level since November 2020 during the session.
Investors may be forgiven for wanting to catch their breath on Friday, but further absorption of the central bank’s moves last week combined with inflation data in Asia and economic readings in Europe could generate more volatility.
Key developments that could provide further guidance to the markets on Friday:
Malaysia, Singapore CPI data
industrial production in taiwan
Purchasing Managers’ Indicators in the Eurozone
Fed Chair Powell Remarks Ahead of “The Fed Is Listening: Transition to a Post-Pandemic Economy”