The Japanese yen strengthened on Wednesday, recouping much of the losses it incurred on Tuesday. The yen climbed by up to 0.8% after having fallen by 1.3% in New York, leading to a volatile day for Japanese stocks. This movement occurred as traders speculated about the Federal Reserve’s potential interest rate decision. Market expectations are split on whether the Fed will implement a 25-basis-point or a 50-basis-point rate cut during its meeting. Current odds for a half-point cut are just over 50%, and the Fed will also release new quarterly projections along with Chair Jerome Powell’s press conference.
Asian stock markets were mixed, with most Asian equities declining while U.S. equity futures showed slight gains following a record high for the S&P 500 Index. European futures were largely flat, and both the dollar and U.S. Treasuries remained stable.
According to Vishnu Varathan of Mizuho Bank, uncertainty surrounds whether the Fed will opt for a 25- or 50-basis-point cut, leading to cautious trading as market participants await further clarity. Economists generally expect a quarter-point reduction, but there is significant speculation about a potential half-point cut.
In Japan, the yen’s rebound was also influenced by anticipation of the Bank of Japan’s (BOJ) decision later in the week. BOJ Governor Kazuo Ueda is expected to maintain the current benchmark rate and discuss the conditions for a potential rate hike later this year.
Chinese stocks listed on mainland markets edged higher following a holiday break, with notable gains in chip-related stocks. This came amid expectations for potential economic stimulus from China, despite mixed reactions from other markets like Hong Kong and the U.S. Oil prices fell slightly after a two-day increase, as traders assessed rising U.S. stockpiles and geopolitical tensions.
