Rates, rates, rates By Reuters


© Reuters. FILE PHOTO: A man walks past the Bank of Japan building in Tokyo, Japan January 15, 2018. REUTERS/Kim Kyung-Hoon/File Photo

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever

Interest rate decisions from the Fed, People’s Bank of China and Bank of Japan – the week ahead won’t be much bigger than that, and it couldn’t come at a more critical time for investors. Asian and global markets.

Investors ran for the hills last week as another upward repricing in U.S. interest rates crushed stocks and bonds, pushed the dollar higher and tightened financial conditions significantly.

It’s not just about the levels that many key bond yields and exchange rates are at, but also how quickly they got there. Six weeks ago, the two-year US Treasury yield was around 2.80%. On Friday, it rose above 3.90%.

The Fed is expected to raise rates another 75 basis points on Wednesday, with an outside chance of 100 basis points. There is much more uncertainty surrounding the PBOC and BOJ, both of which see the rising dollar causing their exchange rates to fall.

The BOJ has warned that it could intervene in the foreign exchange market to support the yen, which is at a 24-year low. It is also under increasing pressure to abandon its ultra-loose “yield curve control” policy that is fueling yen weakness.

The PBOC, meanwhile, is facing a yuan slipping to a two-year low at 7.00 to the dollar, but is under increasing pressure to inject stimulus into a fragile economy hampered by a bloated and creaky property sector.

Difficult decisions in the most trying times. Given how bearish and jittery investors are right now, it’s hard to see what could stop the rot and revive the yen and yuan’s fortunes.

Rate decisions from the Philippines and Indonesia later in the week, and policy meeting minutes from the Reserve Bank of Australia, will also help guide these currencies. But the three big guns will decide.

Key developments that should further guide markets on Monday:

British Prime Minister Truss meets President Biden

from Guindos of the ECB speaks

US NAHB Housing Data (September)

Chinese IDE (August)


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