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Yen slides after minor BOJ policy tweak, stocks advance

2023-10-31T19:43:05Z

The yen slid across the board and hit a 15-year low against the euro on Tuesday after the Bank of Japan’s step to end years of monetary stimulus left investors cold, while global stock indexes were higher a day before the Federal Reserve is expected to again say interest rates will stay high for longer.

The BOJ eased its grip on long-term rates by further loosening its bond yield control policy (YCC) on what analysts viewed as a small and insufficient step.

Traders focused on the BOJ’s dovish pledge to “patiently” maintain accommodative policy, and forecast inflation to slow below 2% in 2025.

The yen fell to a new one-year trough against the dollar. The dollar was last up 1.7% at 151.56 yen, on track for its best one-day increase since late April.

The euro jumped against the Japanese currency to a 15-year high of 160.84 yen, and was last up 1.3% at 160.20 yen . It was on pace for its biggest daily gain since late July.

“Currency traders unquestionably have their knives out for the yen after last night’s dangerously-ambiguous policy change from the Bank of Japan,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

“With major unknowns remaining around the central bank’s reaction function, and another raft of stronger-than-expected data helping boost US yields, rate differentials are tilting more aggressively against the yen as the session unfolds.”

While shares in Europe gained as investors drew comfort from resilient regional results, Asian equities earlier lost ground on renewed fears over the prospects for the Chinese economy following weak manufacturing data.

On Wall Street, heavy-machinery maker Caterpillar (CAT.N) fell as dealer inventories rose and a large order backlog shrank, indicating demand is slowing. Pfizer’s shares (PFE.N) were flat after the drugmaker reported its first quarterly loss since 2019.

Investors are waiting to see what the Fed says after a two-day policy meeting ends on Wednesday.

The Dow Jones Industrial Average (.DJI) rose 135.04 points, or 0.41%, to 33,064, the S&P 500 (.SPX) gained 27.83 points, or 0.67%, to 4,194.65 and the Nasdaq Composite (.IXIC) added 65.13 points, or 0.51%, to 12,854.61.

The pan-European STOXX 600 index (.STOXX) rose 0.59% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) gained 0.33%.

Longer-dated Treasury yields dipped as investors awaited the Fed statement and comments from Fed Chair Jerome Powell.

Benchmark 10-year notes last week hit 16-year highs as investors contemplate higher yields for longer, and on concerns about increasing U.S. Treasury supply.

The yield on 10-year Treasury notes rose 0.3 basis points to 4.880%.

Euro zone yields fell as individual country inflation data pointed to a lower print for the currency bloc overall later in the day. Germany’s benchmark 10-year yield fell 5.5 basis points to 2.77%, testing the previous day’s two-week low.

Oil prices eased as investors worried less about potential supply disruptions from the Middle East. Also, data showed rising output from OPEC and the United States.

Brent crude futures for December delivery, settled 4 cents lower at $87.41 a barrel, ahead of their expiry later on Tuesday. The more heavily traded January contract fell $1.33, or 1.4%,to $85.02. U.S. crude for December delivery fell $1.29, or 1.6%, to $81.02, while those for January delivery fell $1.18 to $80.50.

Related Galleries:

A Japan Yen note is seen in this illustration photo taken June 1, 2017. REUTERS/Thomas White/Illustration/File Photo

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 26, 2023. REUTERS/Brendan McDermid

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, October 27, 2023. REUTERS/Staff

Passersby walk past an electric monitor displaying the Japanese yen exchange rate against the U.S. dollar outside a brokerage in Tokyo, Japan October 4, 2023. REUTERS/Issei Kato/File Photo

The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville/File Photo
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