The Yen Weakens Pushing the Nikkei Higher

This morning, Asian markets opened the weak mostly lower. Only the Japanese stock bourses bucked the downtrend as a weaker yen boosted sentiment. Stronger-than-expected economic data coming out of Japan also helped.

This morning the benchmark Nikkei 225 was up over 1.5 percent. Japan’s third quarter gross domestic product (GDP) was released showing that Japan’s economy grew at 2.2 percent. This was way above the expected growth of 0.9 percent. The yen also remained weaker this morning in early Asian trade hours. As of 17:00 am HK time, the USD/JPY Forex market was trading at 107.69. The yen was around ¥104 during the US election for President which saw Donald Trump winning last week.

In the Down Under, Australia’s benchmark ASX 200 was down around 0.5 percent in early trade. The materials sub-index was down 1.22 percent and the heavily weighted financial sub-index was down 0.8 percent. All of the major banks in Australia were lower this morning. Westpac tumbled over 3.5 percent and ANZ shed 1.22 percent to lead the decliners among Australia’s banks.

Gold mining companies were also taking a hit. Newcrest Mining was down almost six percent and Northern Star Resources was down over 8.3 percent. Evolution Mining was also significantly lower as the gold sub-index was down over 6.7 percent as gold continued to move lower after the initial shock of a Trump win.

Turning our attention back the Forex universe, the US Dollar continues to move higher. The US Dollar index was trading at 99.40. This is the seventh session of gains in a row. The index was near the $97 level before last week’s election.

The Dollar’s appeal is following a spike in Treasury yields. The US benchmark 10 year note is now at its highest level since January. The yield is now at 2.1976, up from 1.8 percent from before the US election results. The 30 year bond is now up to 2.9843 percent. This is up from 2.6 percent last week.

The Dollar’s renewed strength is forcing the US Federal Reserve to face a conundrum of rising inflation. This is leading to concerns of high yield credit and a growing sign of stress in the emerging markets. The Fed is expected to raise interest rates at its December FOMC meeting.

Yesterday, New Zealand was hit by a series of earthquakes. The first measured 7.8 on the Richter scale and the second a 6.2. This morning the New Zealand Dollar was trading to as low as 0.7071 but has recovered, as of 11:50 am HK time to 0.7096.

Analysts expect the weakness in the Kiwi’s currency to be short lived.