Asian investors proceeded cautiously on Thursday following remarks from a Federal Reserve official suggesting a potential delay or reduction in interest rate cuts. Meanwhile, the yen maintained its gains after briefly reaching a 34-year low the previous day.
As a recent market rally begins to lose steam, traders are reassessing the US monetary policy outlook. Above-forecast inflation and economic data have led some to question whether the central bank can adhere to its projection of three rate cuts this year.
Confidence has been further shaken by recent comments from Fed officials. Atlanta president Raphael Bostic reiterated his stance of expecting only one rate cut this year, warning against hasty actions that could disrupt the market. Governor Lisa Cook also urged caution among decision-makers.
The latest remarks came from Fed governor Christopher Waller, who suggested a reduction in the number of rate cuts or delaying them in response to recent data. Waller noted progress in reducing inflation but expressed concern over slowed or stalled progress in recent months.
His comments preceded the release of the personal consumption expenditures (PCE) index, expected to show a slight increase, on Friday. Despite concerns, all three main indexes on Wall Street saw gains, with the S&P 500 reaching another record high.
In Asia, markets were mixed, with Hong Kong, Shanghai, Sydney, and Wellington posting gains while Singapore, Seoul, Taipei, and Jakarta declined. Tokyo saw a decline of over one percent as the yen stabilized after hitting its weakest level since 1990 against the dollar.
A Bank of Japan official’s comments warning of continued accommodative monetary policy contributed to the yen’s slide. Speculation has arisen regarding potential intervention to support the currency, with Vice Finance Minister Masato Kanda expressing readiness to take necessary measures.
Market analysts anticipate heightened anticipation for Bank of Japan intervention, particularly in light of recent yen fluctuations. Concerns persist over potential market disruptions in the absence of intervention before the weekend.
