Japan leads Asian stock selloff, Yen resumes climb: Markets wrap
Asian equity markets Thursday, extending the volatile trading of the past week as investors digest signals from central banks on the path ahead for interest rates.
The Topix Index opened lower alongside benchmarks in Australia and South Korea. US futures also fell in early Asian trading Thursday after the S&P 500 and Nasdaq 100 dropped on Wednesday. The yen rose, having dropped 1.6% on Wednesday.
A summary of opinions from Bank of Japan’s board members for its July decision showed that one member said timely interest rate increases were needed to avoid rapid hikes, and that one said normalization shouldn’t be an end in itself.
Last week’s BOJ rate increase, combined with soft US data that supported the case for Federal Reserve cuts, triggered a rally in the yen and a selloff in Japanese stocks that rippled across markets. By Wednesday, the BOJ’s deputy governor warned the central bank would hold off on further hikes until markets calmed.
The unwinding of the yen carry trade, spurred by the BOJ’s hawkish stance last week, has since eased, according to Quincy Krosby at LPL Financial.
“Markets globally have felt a sigh of relief as the velocity of the unwinding eases, but the yen’s relationship to the dollar is also a key component of the carry trade calculus,” she noted. “A softer dollar, driven by the markets perception that the Fed will soon initiate an easing cycle, should help support a stronger yen — a negative for the trade.”
US Treasury yields fell Thursday, paring Wednesday’s gains that were in part
