Asian stocks, yen weaker on US inflation data

People walk past a screen showing the Hang Seng stock index in the Central District in Hong Kong, China on October 25, 2022. REUTERS/Lam Yik/File Photo Get license rights

SINGAPORE, Nov 14 (Reuters) – Asian shares rose on Tuesday ahead of a key U.S. inflation report that could heavily weigh on the Federal Reserve’s policy outlook, while a weaker yen hovered near a 33-year low, putting it back in intervention territory.

MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) was 0.23% higher.

The Japanese yen was at 151.71 per dollar in Asian hours, having touched a one-year low of 151.92 on Monday. If the battered coin breaks below last year’s low of 151.94, it will mark a fresh 33-year low.

Japanese Finance Minister Shunichi Suzuki said on Tuesday that the government would take all necessary measures to respond to currency swings, repeating his usual mantra that excessive swings are undesirable.

European stocks were also expected to be off the charts, with Eurostax 50 futures down 0.05%, German DAX futures down 0.01% and FTSE futures down 0.15%.

Investors awaited the U.S. inflation report after Federal Reserve Chairman Jerome Powell and other policymakers said they still weren’t sure interest rates were high enough to control inflation.

Economists polled by Reuters expect U.S. consumer price inflation to fall to 3.3% in October from 3.7% in September, the so-called core inflation rate, which lowers to 4.1% without adjusting for dynamic components.

“This data has significant influence on the Federal Reserve’s future policy direction,” said Anderson Alves, a trader at ActiveTrades.

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“A misstep, particularly in the less volatile core inflation component, could lead traders to believe the Fed may avoid further hikes. Conversely, a pulse could trigger a significant repricing in the short-term US interest rate curve.”

China stocks were slightly lower, with the blue-chip CSI 300 index (.CSI300) down 0.19%, while Hong Kong’s Hang Seng index (.HSI) rose 0.09%, ahead of a summit between the top leaders of the world’s two largest economies later this week.

The benchmark 10-year Treasury yield was at 4.630%, easing a touch from Monday’s one-week high of 4.696%.

Markets have largely taken Moody’s move to cut its US AAA credit rating outlook to “negative” from “stable” on Friday in their stride. Moody’s decision comes after rival Fitch downgraded the U.S.’s top credit rating in August.

“With a year to go before the presidential election, the government is unlikely to announce significant plans to address these issues, given the unpopularity of promised spending cuts and tax increases,” said Gary Dugan, chief investment officer at Dalma Capital.

The US faces another partial government shutdown starting Saturday if Congress does not pass a stopgap spending bill.

Yen watch resumes

The yen’s broad decline has traders again eyeing whether Japanese authorities will intervene, with US inflation data likely to be the trigger for the next big move.

Japan last intervened in the currency market – selling dollars and buying yen – in October last year. Officials are clear of further such measures since intervention data released last month.

The currency has fallen 14% against the dollar so far this year.

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The yen briefly rose against the dollar in New York hours on Monday, hitting a year-to-date low, which analysts attributed to volatility in options trading ahead this week.

Nicholas Chia, a macro strategist at Standard Chartered, said the yen’s swings indicate markets are worried about potential intervention, which helps curb excessive speculation.

“In a way, market participants are doing the work of the Ministry of Finance for them, as markets begin to second-guess price action behind any sudden decline in dollar/yen,” he said.

The dollar index, which measures the U.S. currency against six rivals, rose 0.057% to 105.69. The index fell 1% in November, snapping its three-month winning streak.

Oil prices edged higher after an OPEC report said market fundamentals were strong. U.S. crude was up 0.27% at $78.47 a barrel, while Brent was up 0.25% at $82.73.

Reporting by Ankur Banerjee Editing by Sri Navaratnam and Miral Fahmi

Our Standards: Thomson Reuters Trust Principles.

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