Publications
Partners
Tokyo - Japan's Nikkei rose 0.9% in choppy trade on Monday, taking its cues from the currency markets ahead of a Bank of Japan policy decision the next day with the market expecting further easing, albeit a minor move.
Former BOJ Deputy Governor Toshiro Muto said on Friday the central bank may ease policy as inaction would run the risk of spurring further yen gains, given the prospects for easing by the US Federal Reserve.
The policy move expected most by economists polled by Reuters was yet another expansion of a cheap fund-supply tool that the BOJ set up in December and expanded in March and August.
"The market took heart from the currency market where short-covering in dollar/yen picked up speed as markets expect that the BOJ will ease policy further," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.
"Nervous trade will likely continue this week, even after tomorrow's event, as US jobs data is also set to be released later in the week."
By the midday break, the benchmark Nikkei had gained 81.84 points to 9 486.07, after moving in and out of negative territory in early morning trade. The broader Topix added 0.3% to 832.77.
Kuramochi said a foreign hedge fund had recently placed large short positions around 9 480 and the Nikkei's gains picked up speed after the index rose above that level. He added that moves were led by trade in futures.
On Friday, the Nikkei rose 0.4%, boosted by short-covering, starting the new quarter on an upbeat note after September marked its best month since March.
In Asia trade, the dollar traded at ¥83.78, having twice found support at 83.15/16 last week, above its 15-year low of ¥82.87 set just before Japan intervened for the first time in six years on Sept. 15.
"The market has largely factored in the possibility of further easing at the meeting, but at this point it needs to see the actual content of the decision," said Masayuki Otani, chief market analyst at Securities Japan, Inc.
"With the yen staying on the strong side, investors are also waiting to see if there will be another round of intervention. If the BOJ eases and this is combined with intervention, that could have a bigger impact."
Market players see solid support for the Nikkei around 9 370, near its 13-week moving average. The 38.2% retracement of the Nikkei's move from 8 796 to the peak of its September rally at 9 704 also falls near that level.
Further support is expected around 9 350, the Nikkei's 55-day moving average. One analyst said the 25-day moving average, which has been steadily moving upward and is now at 9 311, is another point of support for the index.
Resistance likely looms around 9 530, the upper level of the Nikkei's daily Ichimoku cloud on charts.
Wall Street rose on Friday, led by gains in resource stocks after data in China showed a pick-up in manufacturing activity.
