Asian equities slipped as manufacturing activity data from China disappointed and the yen weakened after the Bank of Japan (BOJ) made changes to its bond yield control policy. The yen fell 0.7% against the dollar, touching a session low of 150.12, after the BOJ redefined 1.0% as a loose “upper bound” rather than a rigid cap. The BOJ’s decision to raise its de-facto ceiling for the yield caused speculation that the bank may eventually remove its yield curve control policy. Meanwhile, stocks in Asia fell, with the MSCI’s broadest index of Asia-Pacific shares outside Japan hovering close to a one-year low after China’s manufacturing activity unexpectedly returned to contraction.
Investors are closely watching major central bank meetings this week, including the BOJ, Federal Reserve, and Bank of England. The Federal Open Markets Committee is expected to decide to let the Fed funds target rate stand at 5.25%-5.50%. Recent data has shown the resilience of the US economy, and comments from Fed Chair Jerome Powell will be closely scrutinized to gauge how long interest rates are likely to stay elevated. The Treasury Department expects to borrow $76 billion less this quarter than previously anticipated on expectations of higher revenue receipts. The dollar index rose 0.226%, while the euro and sterling both declined against the U.S. currency. Oil prices rose, with U.S. crude at $82.61 per barrel and Brent at $87.81, and gold prices remained flat after dropping below the $2,000/ounce milestone.
In summary, Asian equities slipped after China’s manufacturing activity contracted and the yen weakened following changes to the BOJ’s bond yield control policy. The BOJ redefined 1.0% as an upper limit for bond yields, sparking speculation of a potential removal of its yield curve control policy. The MSCI’s broadest index of Asia-Pacific shares outside Japan hovered close to a one-year low. Investors are closely watching major central bank meetings this week, including the Federal Reserve and the Bank of England. The U.S. economy has shown resilience, and the Treasury Department expects lower borrowing this quarter. The dollar index rose, while oil prices increased and gold prices remained flat.
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