Stock market today: S&P 500 falls as government shutdown, trade jitters persist
Investing.com-- Most Asian currencies moved in a tight range on Thursday, while the dollar steadied from mild overnight gains as markets digested a largely in-line interest rate cut and outlook from the U.S. Federal Reserve.
The Japanese yen sat on some gains this week, with focus now turning to the Bank of Japan’s policy meeting, which is set to conclude on Friday. Key Japanese inflation data is also on tap.
Broader Asian currencies steadied after gaining some ground this week, as growing conviction in lower U.S. interest rates dented the dollar. But the greenback firmed after the Fed’s Wednesday decision and was steady in Asian trade.
Japanese yen flat with BOJ, CPI inflation on tap
The Japanese yen’s USD/JPY pair steadied at 146.98 yen on Thursday, having gained some ground in recent sessions.
The BOJ is widely expected to keep interest rates unchanged at the conclusion of a two-day meeting on Friday, especially in the face of heightened political uncertainty after Prime Minister Shigeru Ishiba’s abrupt resignation earlier in September.
But markets are bracing for some potentially hawkish comments from the central bank, with sticky Japanese inflation driving bets that the BOJ may yet hike rates again this year.
Japanese consumer price index inflation data for August is due before the BOJ’s decision on Friday, and is expected to show price pressures remaining sticky. Core inflation is also expected to remain well above the BOJ’s 2% annual target.
Dollar steadies as markets digest Fed rate cut, outlook
The dollar index and dollar index futures moved little on Thursday after logging some overnight gains following the Fed’s decision.
The greenback had fallen to a 3-½ year low in the run-up to the Fed’s cut, but rebounded sharply from said lows on Wednesday.
The Fed cut interest rates by 25 basis points, as expected, citing increased pressure on the labor market. The central bank also indicated that more cuts will come to stem any further weakness in the labor market.
But the central bank still offered a more balanced outlook on interest rates than what President Donald Trump has demanded, indicating that further easing will not be as aggressive as some market participants are hoping.
Chair Jerome Powell also flagged sustained caution over the economy, especially amid a cooling labor market and persistent inflationary risks.
Trump’s recently-approved pick for the Fed board of governors, Stephen Miran, was the only dissenting member in the central bank’s 12-member rate-setting committee. Miran called for a 50 bps cut and presented an outlook for interest rates that factored in Trump’s calls for aggressive loosening-- a scenario that other policymakers did not consider.
Broader Asian currencies were a mixed bag. While the prospect of lower U.S. interest rates does bode well for the sector, increasing risks around the U.S. economy stand to hurt appetite for more risk-driven assets.
Safe havens such as gold and the Japanese yen firmed on this notion.
In Asia, the Chinese yuan’s USD/CNY pair rose 0.1%, with the yuan cooling mildly after racing to near 10-month highs on sustained policy support from Beijing.
China this week pledged to roll out more stimulus aimed at boosting private spending, after a series of dismal readings on the economy.
The New Zealand dollar was the worst performer among Asia-Pacific currencies, with the NZD/USD pair sinking 0.6% after gross domestic product data showed the New Zealand economy shrank in the second quarter.
The Australian dollar’s AUD/USD pair fell 0.1% after rallying to 10-month highs.
The Indian rupee’s USD/INR pair rose 0.3% but remained below 88 rupees, after hitting a series of record highs in September.
The South Korean won’s USD/KRW pair rose 0.3%, while the Singapore dollar’s USD/SGD pair rose 0.1%.