Asian markets rebounded on Friday as concerns over the Middle East conflict and rising inflation began to ease. The Japanese yen rallied sharply, while oil prices retreated from recent peaks, indicating a broader shift in investor sentiment across the region.
After a week in which investor concerns were shaken by increased fighting in the Middle East, driving oil prices up about 10% and worries of higher inflation, a greater sense of calm returned to markets on Friday.
Fed officials soothe rate-hike fears
Market analysts highlighted comments from several Federal Reserve officials as a key factor in restoring confidence. New York Fed President John Williams told CNBC that policymakers needed to “wait and see” before adjusting interest rates, noting that recent inflation data had been encouraging.
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In a similar vein, Fed Governor Christopher Waller said his decision on the September policy meeting would depend on incoming data, particularly the upcoming August inflation figures. He added, “If there is continued progress toward our 2% goal, then I am willing to support holding the policy rate at its current level. But if inflation comes in hot, I would consider a rate hike.”
With investors now focusing on the upcoming US non-farm payrolls data and consumer price index report, both due later this month, market sentiment appeared to stabilize. All three main indexes on Wall Street ended well up, with the Dow and Nasdaq adding more than 1%.
Yen’s surge renews intervention talk
The Japanese yen strengthened to 155.30 per dollar on Friday, having traded around 160.40 just two days prior. This move came as expectations grew that the Bank of Japan (BoJ) would raise interest rates at its September meeting, with one official hinting at a potential follow-up increase.
The yen’s sharp appreciation against the dollar reignited speculation about currency intervention. The historic joint operation conducted by Tokyo and Washington in July had aimed to support the yen.
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According to Paresh Upadhyaya, director of currency strategy at Pioneer Investments, “It appears the BoJ will pull the trigger and hike in September but then open the door to a potential pick up in the pace of hiking. We are finally seeing a follow-through to intervention by some meaningful expectation on the policy front.”
Key Asian markets up
In Asia, Tokyo, Hong Kong, Seoul, Singapore, and Taipei climbed more than 1%, while Wellington, Manila, and Bangkok were also well up. Shanghai, Sydney, and Jakarta dipped. London, Paris, and Frankfurt retreated at the open.
The yen maintained its gains enjoyed over the previous two days amid growing expectations for a Bank of Japan interest rate hike this month, and a suggestion from an official that another could be on the way at the next meeting.
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