(Bloomberg) — The yen rebounded sharply after falling to a 34-year low, sparking speculation that authorities may have intervened. European and US stock futures rose to follow a positive session in Asia.
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The Japanese currency extended gains up to 2.1% after falling beyond 160 per dollar for the first time since 1990. Low liquidity due to a public holiday in the country was also cited as a reason for these volatile movements. Top currency official Masato Kanda responded “no comment at this time” when asked by reporters whether he had intervened or not.
“The market is very nervous and with little liquidity the yen becomes a toy to play with,” said Rodrigo Catril, a strategist at National Australia Bank. “The risk of intervention is an additional factor.”
Euro Stoxx 50 futures rose 0.4%, while S&P 500 contracts rose slightly less after the US benchmark recorded its best weekly gain in 2024.
Chinese stocks led the rally in Asia, reinforcing signs of a recovery in a once-battered market amid a return of foreign currencies and improving profits. The Hang Seng Index pared gains after recovering into a technically bullish market. Real estate stocks jumped after major developer CIFI Holdings Group Co. reached a resolution with bondholders over its liquidity problems.
Traders will also focus on the Federal Reserve’s policy meeting on Wednesday after the central bank’s preferred measure of inflation rose at a rapid pace in March, although roughly in line with estimates. With officials likely to keep rates steady at their highest level in more than two decades, interest will be focused on any change in tone in Chairman Jerome Powell’s post-meeting statement and news conference.
“As all measures of U.S. consumer prices show a sharp acceleration over the past three to four months, the FOMC is expected to sharply reverse its earlier forecast of significant policy easing this year” , wrote Societe Generale economists, including Klaus Baader, in a note. to customers. “That said, markets have already priced rate cuts drastically, so unless Chairman Powell exaggerates the possibility of a rate hike, the market damage will likely be modest.”
The gauge of U.S. Treasury yields fell 2.3% this month, the biggest monthly decline since February last year, as the Fed’s hawkish rhetoric and strong economic data pushed back bets on a rate cut. Swaps traders now see just one Fed cut for all of 2024, well short of the roughly six-quarter point cuts they expected at the start of 2024.
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