Asia Market News: USD/JPY Surges toward 152 as Focus Turns to the Fed

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Published: Mar 20, 2024, 02:40 UTC

Key Points:

On Wednesday, the USD/JPY surged toward the 152 level as investors responded further to the dovish BoJ exit from negative rates.
The PBoC left loan prime rates unchanged ahead of the Fed interest rate decision.
It was a mixed morning for the Asian equity markets, with the PBoC pressuring the Hang Seng Index. The ASX 200 tracked overnight gains from Wall Street.

USD/JPY Rallies Toward 152 on Dovish Bank of Japan Pivot

On Wednesday, the USD/JPY was up 0.22% to 151.178, extending gains from Tuesday.

Investors reacted further to the dovish Bank of Japan pivot from negative rates. While the BoJ exited negative rates, the markets expect the BoJ to linger at zero for 2024.

At zero, rate differentials remain firmly in favor of the US dollar, with carry trades raising the threat of an intervention. In Q4 2023, the threats of interventions to bolster the Yen capped the USD/JPY at a 2023 high of 151.908.

Later today, the US Federal Reserve could delay the timeline on Fed rate cuts in response to hotter-than-expected inflation numbers. A less dovish Fed rate path could further drive buyer demand for the US dollar, with rate differentials being the focal point.

USDJPY Daily Chart 200324

People’s Bank of China Leaves Loan Prime Rates Unchanged

On Wednesday, the People’s Bank of China (PBoC) was in the spotlight. Recent economic indicators from China, including industrial production, signaled a pickup in economic activity. The better-than-expected data removed the immediate need for further policy measures to bolster the Chinese economy.

In line with market expectations, the PBoC left the 1-year and 5-year loan prime rates at 3.45% and 3.95%, respectively.

The Asian equity market had a mixed reaction to the hold, with the Hang Seng Index struggling for direction. On Wednesday, the Hang Seng Index was up 0.01% to 16,532. The CSI 300 was down 0.07%.

Hang Seng Index Daily Chart 200324

In contrast, the AUD/USD responded positively to the PBoC decision to leave the LRPs unchanged. The Aussie dollar rose from $0.65291 to a morning session high of $0.65378 before easing back.

On Wednesday, the AUD/USD was up 0.05% to $0.65354.

AUDUSD 30 Minute Chart 200324

ASX 200 Tracks Overnight Gains on Wall Street

On Wednesday, the ASX 200 was up 0.29% to 7,726 in the morning session. Mining and oil stocks contributed to the morning gains. Investors responded further to the RBA interest rate decision. On Tuesday, the RBA held the cash rate at 4.35%. Significantly, the RBA removed the immediate threat of an interest rate hike.

The better-than-expected economic data from China continued to support the mining sector. Rio Tinto Ltd. (RIO) and BHP Group Ltd (BHP) were up 1.45% and 0.71%, respectively. Fortescue Metals Group Ltd. (FMG) rallied by 1.87%.

Overnight oil price gains on hopes of rising demand supported oil stocks. Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) advanced by 0.94% and 0.47%, respectively.

However, a stronger Greenback pressured overnight gold (XAU/USD) prices, impacting gold stocks. Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. were down 2.31% and 1.76%, respectively.

ASX 200 tracked Wall Street into positive territory.

ASX200 Daily Chart 200324

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.