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Sydney - The yen declined and the dollar extended gains against major peers as the US Federal Reserve and the Bank of Japan announced diverging monetary policies.
Stocks in Tokyo pared gains while they were mixed elsewhere in Asia.
The Japanese currency fell to a two-month low as Bloomberg’s dollar index rose for a second day. The US central bank set an October start for shrinking its balance sheet and maintained a forecast for another rate increase this year, while the BOJ kept its monetary stimulus unchanged.
Japan’s Topix index wiped out almost all the session’s advance. The 10-year Treasury yield approached 2.30%. Oil held above $50 a barrel, gold retreated and base metals tumbled.
While US policy makers left the benchmark interest rate unchanged, markets reacted to officials’ hawkish forecast for where rates will be at the end of the year as they begin a reversal of quantitative easing.
BOJ Governor Haruhiko Kuroda and his board left the target interest rates and asset purchase program unchanged on Thursday, a decision expected by all 45 economists surveyed by Bloomberg, though one dissenting member unexpectedly emerged.
A rout in iron ore continued amid mounting concerns that global supplies are set to expand while demand from China will decline. Most-active SGX AsiaClear futures in Singapore sank as much 4.3% to $64.13 a metric ton, the lowest since July, with the contract headed for a third weekly loss.
What to watch out for the rest of this week:
New Zealand’s economy expanded at a faster pace in the second quarter, with GDP rising 0.8% matching economists’ median forecast. It’s the last major economic release before the September 23 election. Philippine and Taiwan rate decisions are due on Thursday.
Brexit strategy is in focus as Theresa May prepares to outline her revised approach on Friday.
Campaigning continues in Germany, days before the September 24 election. The OECD publishes the Interim Economic Outlook in Paris.
Here are the main moves in markets:
Stocks
Japan’s Topix index climbed 0.1% as of 2:26pm. Tokyo time after rising as much as 0.7%. The Kospi index was little changed and Australia’s main benchmark fell 0.8%. Hong Kong’s Hang Seng Index swung between gains and losses with the Shanghai Composite Index. Futures on the S&P 500 Index were flat.
The main gauge rose 0.1%. The index closed at an all-time high, but hasn’t moved more than 0.3% for five sessions.
Currencies
The Bloomberg Dollar Spot Index rose 0.2%, adding to a 0.5% surge on Wednesday. The yen slid 0.3% to 112.49 per dollar. It dropped 0.6% on Wednesday.
The Australian dollar fell 0.7% to 79.76 U.S. cents. The New Zealand dollar lost 0.6% to 73.14 US cents.
The kiwi has been sensitive to opinion polls ahead of an election this weekend, jumping on Wednesday when the latest survey showed the ruling National Party surging back into the lead over the main opposition Labour Party.
The euro was at $1.1880, down 0.1%. It declined 0.9% in the previous session. The onshore yuan dropped after the PBOC weakened its daily reference to the lowest since September 1.
Bonds
The yield on 10-year Treasuries was steady at 2.27%, the highest since July. Australian 10-year bond yields climbed about one basis point to 2.84%.
Commodities
Gold lost 0.3% to $1 297.70 an ounce. West Texas Intermediate crude climbed 0.5% to $50.66 a barrel following a 1.9% advance. A drop in US fuel supplies boosted the outlook for crude demand.
Copper extended loses, falling as much as 1.3% on the London Metals Exchange before trading down 1.1% at $6 454.50 a metric ton. Iron ore futures on the Dalian Commodity Exchange were on the cusp of closing in bear market territory.
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