- The Japanese yen surged to its strongest level since February, driven by unwinding of carry trades and expectations of faster Bank of Japan tightening.
- Asian stocks fell, led by a 1% drop in Australian shares owing to weak consumer sentiment, while oil prices rose after Iran threatened economic retaliation against the US.
- China’s export growth improved with strong demand for tech products, Japan’s economy grew faster than first estimated, and Japanese wages rose, supporting calls for tighter monetary policy.
SINGAPORE – A surge in the Japanese yen and mixed economic data sent Asian stocks lower on Sept 8, while fresh Iranian threats in the Gulf drove commodity prices and Treasury bond yields higher.
The Japanese yen jumped as much as 1 per cent to 152.89, its strongest level since Feb 18, as investors unwound an estimated US$2.35 trillion (S$2.97 trillion) in yen-funded carry trades.
“The yen has rallied to its strongest level since February, driven by a sharp unwinding of short-yen and carry-trade positions as investors price in faster Bank of Japan tightening,” said Joel Kruger, market strategist at LMAX Group in London.
“Speculation over capital repatriation by Japanese investors and the authorities’ demonstrated willingness to support the currency through intervention have added momentum to the move.”
Japan’s Nikkei 225 share index fluctuated between gains and losses before lurching down 1.7 per cent, as S&P 500 e-mini futures slid 0.3% after a holiday in the US on Sept 7.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.5 per cent lower, with regional declines led by a 1 per cent fall in Australian shares after a measure of local consumer sentiment fell sharply in September.
Oil prices rose for a third day in Asia, with Brent crude futures climbing 1.4 per cent to US$98.34 a barrel, after Iran threatened to retaliate on Sept 8 against the US with “economic warfare” and said it had fired an advanced missile at US warships.
“While US Labour Day made for a somewhat quieter start to the week for trading volumes, the weekend’s tit-for-tat strikes between the US and Iran continued to put upward pressure on oil prices, acting as a drag on risk sentiment more broadly,” Westpac analysts said.
Growth prospects
In China, data showed export growth quickened during August, buoyed by strong overseas appetite for high-tech and artificial intelligence-related products.
“While the product breakdown looks ever more lopsided, the geographic picture is smoothing out as the US slump recedes and demand across other markets remains firm,” ING analysts wrote in a research note.
Japan’s economy grew faster than initially estimated in the April-June quarter from the previous three months, supported by business spending, revised data showed on Sept 8, but the figure still lagged analysts’ forecasts.
Japanese government bonds surged after the data, with the yield on the 10-year note falling 4.5 basis points to 2.885 per cent, providing further momentum to the yen’s rebound just weeks after it hit a four-decade low and triggered a rare joint intervention by the authorities in Tokyo and Washington.
Meanwhile, data showed that Japanese real wages rose 2.4 per cent in July from a year earlier, marking the biggest increase since May 2021.
“With wage growth going from strength to strength, the case for the Bank of Japan to hasten the pace of tightening is becoming increasingly compelling,” Capital Economics analysts wrote in a research report.
Over in Australia, shares slumped 0.6 per cent after a measure of local consumer sentiment fell sharply in September.
The yield on the US 10-year Treasury bond was up 1.6 basis points at 4.798 per cent, resuming its climb and rising for a second session after a two-day retracement last week.
Traders are still pricing an implied 60 per cent probability of a 25-basis-points hike at the Federal Reserve’s next two-day meeting ending on Sept 16, according to the CME Group’s FedWatch tool, about the same chance as a week ago.
The dollar index, which measures the greenback’s strength against a basket of six currencies, was trading flat around a two-week low of 98.83.
Gold was up 0.5 per cent at US$4,428.23. In cryptocurrencies, Bitcoin nudged 0.1 per cent higher to US$79,333.01, while ether climbed 0.2 per cent to US$2,498.94.
In commodities, copper prices hit an all-time high of US$14,597 a tonne as supply concerns grew, while gold was steady at US$4,404.29.
In cryptocurrencies, Bitcoin slid 1 per cent to US$78,458.04, while ether was 1.1 per cent lower at US$2,468.37. REUTERS