Publications
Partners
Tokyo - The yen gained as the Australian and New Zealand dollars held declines amid growing wariness over prospects the Federal Reserve will raise rates at this month’s meeting.
Japan’s currency halted a two-day drop after equities and emerging-market assets slumped on Friday by the most since the UK voted in June to leave the European Union.
Oil extended declines after US producers increased drilling amid an overhang of crude and fuel inventories. Fed Governor Lael Brainard will speak in Chicago on Monday ahead of the central bank’s self-imposed blackout period running up to the September 20 to September 21 Federal Open Market Committee meeting. South Korea’s won fell for a third day, heading for its longest slide in two months.
“It’s natural that stocks fell on growing caution over a rate hike as the day of the Fed’s decision draws closer,” said Masashi Murata, a currency strategist at Brown Brothers Harriman in Tokyo.
“Markets had been too confident that a hike wouldn’t happen. But global economies are not in a critical phase, so there’s a limit to selling on risk aversion. Money will eventually seek yields and underpin high-yielding currencies.”
The yen gained 0.2% to ¥102.50/$ as of 07:49, after strengthening as much as 0.4%. Australia’s dollar fell 0.1% to 75.33 US cents, after tumbling 1.3% on Friday, its steepest drop in more than two months. New Zealand’s currency was little changed at 73.25c from Friday when it dropped 1%, its biggest decline in five weeks.
“While the Aussie and kiwi lost some ground Friday, they still remain close to recent highs,” said Robert Rennie, global head of foreign exchange and commodity strategy at Westpac Banking.
In Sydney. “Coming into the BoJ and Fed meetings I expect to see increased volatility and AUD underperforming,” even though the continuation of an accommodative stance from Japan and the European Central Bank will support the Aussie at its lower end, he wrote via electronic messaging.
Nuclear concern
The won slid 1% to 1 110.57 per dollar, set for its biggest drop since August 29 as a report North Korea is preparing for another nuclear test added to pressure on the currency.
A gauge of Asian shares dropped 2.1%, while Japan’s Nikkei 225 Stock Average retreated 1.9%.
Boston Fed President Eric Rosengren said Friday the US economy could overheat if the central bank waited too long to raise interest rates, boosting the probability of a rate increase by December to 60%.
The odds of a Fed move at its September 20 to September 21 meeting edged up to 30% as of Friday from 28% a day earlier, according to fed funds futures.
“The unclear guidance that the FOMC and oil-producing nations are providing could weigh on risk appetite in the short term ahead of any announcements,” said Con Williams, rural economist at ANZ Bank New Zealand in Wellington.
Given Fed officials’ recent remarks not giving any clear-cut direction, “it seems like it could go either way, so brace for a little more volatility,” Williams said, referring to Brainard’s speech.
