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Asia stocks rise, yen plumbs 34-year low as BOJ stands pat on rates


By Rae Wee

SINGAPORE (Reuters) -The yen fell amid volatile trade on Friday after the Bank of Japan (BOJ) maintained its accommodative monetary policy stance at the conclusion of its two-day policy meeting, while Asian shares rose in the broader market.

The BOJ kept interest rates around zero on Friday, as expected, while removing a reference to the amount of government bonds it has roughly committed to buying each month.

The central bank also issued fresh estimates projecting inflation to stay near its 2% target in the next three years, signalling its readiness to raise borrowing costs this year.

Still, the Japanese yen fell to the weaker side of 156 per dollar in a knee-jerk reaction to the decision, and last stood at 156.15 per dollar.

“Currency markets were likely looking for some form of more explicit communication on policy moves. But it appears markets may be too hopeful,” said Christopher Wong, a currency strategist at OCBC.

Ten-year Japanese government bond futures came off lows. [JP/]

Focus now turns to BOJ Governor Kazuo Ueda’s news conference later on Friday for further details of the BOJ’s policy outlook.

Fears of an intervention from Tokyo to shore up the yen also remained high, given the yen’s decline to multi-decade lows against a resurgent dollar.

Japanese Finance Minister Shunichi Suzuki said on Friday the country is concerned about negative effects of the weak yen, adding to the slew of aggressive jawboning from authorities in recent weeks, though to little effect.

“Absence of any other measures so far just gives the green light for dollar/yen to keep testing policymakers’ patience,” OCBC’s Wong said.

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Riding on a weaker yen, Japan’s Nikkei extended early gains and was last 1% higher.

Elsewhere, MSCI’s broadest index of Asia-Pacific shares outside Japan rose nearly 1%. Hong Kong’s Hang Seng Index surged 2.5%, while Chinese blue chips edged 1.3% higher.

U.S. stock futures jumped after tech giants Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) reported quarterly results that beat Wall Street estimates.

Nasdaq futures advanced more than 1%, while S&P 500 futures rose 0.8%.


Investors were also digesting the implications of Thursday’s data which showed the U.S. economy grew at its slowest pace in nearly two years in the first quarter, though inflation accelerated.

That reinforced expectations that the Federal Reserve would not cut interest rates before September, while some are also pricing in a small chance of a further rate increase.

“The U.S. Q1 GDP report delivered the worst of both worlds, softer than expected growth and higher than expected inflation,” said Rodrigo Catril, senior FX strategist at National Australia Bank.

U.S. Treasury yields surged to five-month highs in the previous session and remained elevated in Asia. [US/]

The two-year yield hovered near the 5% level, while the benchmark 10-year yield steadied at 4.7003%.

The dollar, however, slipped on the back of the weaker U.S. growth, and was nursing some of those losses on Friday.

Sterling dipped 0.06% to $1.2506 after touching a two-week high on Thursday, while the euro eased 0.04%. (FRX)

Focus now turns to March’s core PCE price index data due later on Friday – the Fed’s preferred measure of inflation – for further clues on the U.S. rate outlook.

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“We don’t think inflation will give the Fed reason to tighten,” said James Reilly, a markets economist at Capital Economics.

“Granted, the PCE data… could present another ‘bump’ in the road, extending a succession of stronger-than-expected U.S. inflation and activity prints; but the Fed has already acknowledged that these would come,” Reilly added. “We continue to think that the disinflationary trend will reassert itself soon and that Fed cuts have therefore been delayed, not cancelled.”

In commodities, Brent edged 0.46% higher to $89.42 a barrel, while U.S. crude gained 0.44% to $83.94 per barrel. [O/R]

Gold rose 0.18% to $2,336.05 an ounce. [GOL/]

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