Asian markets experienced fluctuations on Friday as investors attempted to follow a Wall Street surge ahead of crucial US jobs data. Tokyo faced a setback from an extended yen rally, fueled by expectations that Japan might shift away from its ultra-loose monetary policy. Despite a volatile week, signs of a slowdown in the US labor market and economy raised speculation that the US Federal Reserve could cut interest rates in early 2024, potentially impacting markets.
December, however, posed challenges amid concerns of overdone buying and worries that weaker economic indicators might push the US into a recession. Inflation easing and a slowdown in US job openings and private payrolls in November added to the cautious sentiment among traders.
The week concluded with Wall Street’s main indexes posting strong gains, led by the Nasdaq’s outperformance. In Asia, Hong Kong and Shanghai saw fluctuations, while Sydney, Seoul, Singapore, and Taipei witnessed gains, and Wellington recorded a decline. Tokyo suffered a notable drop of over one percent due to the yen’s strength against the dollar, negatively affecting exporters.
The yen’s surge followed comments by Bank of Japan chief Kazuo Ueda hinting at a potential shift from the long-standing ultra-loose monetary policy. However, analysts questioned the sustainability of the rally, considering the possibility of the Bank of Japan delaying major moves in its upcoming policy decision. Some attributed the significant currency movements to short-sellers adjusting their positions.
Analysts, such as Bipan Rai from CIBC, considered the likelihood of a rate hike on December 19 as a long shot. Helen Given of Monex USA expressed skepticism about Ueda’s words coming to fruition, deeming the recent currency movement as overdone. She anticipated the yen ending the year at 146 against the greenback.
