Asian shares were trading higher on Monday as optimism over Wall Street’s rally at the end of the week fueled market sentiment. Sydney’s S&P/ASX 200 added 0.6%, South Korea’s Kospi surged nearly 1.0%, Hong Kong’s Hang Seng jumped 1.2%, and the Shanghai Composite rose 0.6%. However, trading was closed in Tokyo due to a Japanese national holiday. The recent string of strong earnings have boosted market sentiments, but the declining Japanese yen could be a risk factor according to Stephen Innes, managing partner at SPI Asset Management. The yen reached a new 34-year low following the Bank of Japan’s decision to keep interest rates unchanged.
The U.S. dollar edged up to 159.17 Japanese yen on Monday from 158.30 yen, while the euro cost $1.0716, up from $1.0699. A weak yen can benefit Japan’s exporters like Toyota by boosting the value of their overseas earnings when converted into yen. However, a weak currency can negatively impact the economy in the long run by reducing purchasing power and potential wage growth. On Wall Street, shares closed out a solid week with the S&P 500 rallying 1% to finish its first winning week in the last four. The Dow Jones Industrial Average rose 153 points, and the Nasdaq composite jumped 2%.
Recent data on U.S. inflation have analysts expecting the Federal Reserve to keep rates on hold. The central bank has indicated that they could hold its main interest rate high for a while to ensure inflation heads down toward the 2% target. Treasury yields eased in the bond market following the report on inflation, with the 10-year Treasury falling to 4.66% and the two-year Treasury yield holding steadier. In energy trading, benchmark U.S. crude fell 80 cents to $83.05 a barrel, while Brent crude, the international standard, lost 91 cents to $88.59 a barrel.
Investors will be closely monitoring the Federal Reserve policy meeting set for later in the week. The mood in the market remains positive after last week’s tech-driven rally on Wall Street. The Bank of Japan’s decision to keep interest rates unchanged has led to a decline in the Japanese yen, which could be a risk factor moving forward. The recent strong earnings and overall market sentiment have contributed to the positive outlook, but concerns about the impact of a weak currency on Japan’s economy remain.
The focus is on developments surrounding the Japanese yen against major currencies, with the currency reaching a new 34-year low. A weakening yen can benefit exporters but may have negative implications for the wider economy. The U.S. dollar has edged up against the yen, and the euro has also seen a slight increase. The strong performance on Wall Street has provided a boost to Asian shares, with markets in Sydney, South Korea, Hong Kong, and Shanghai all showing gains. However, the upcoming Federal Reserve meeting and concerns about inflation could impact market movements in the coming days.
Overall, market sentiment remains positive, driven by strong earnings and the recent rally on Wall Street. The decision by the Bank of Japan to keep interest rates unchanged has had an impact on the Japanese yen, leading to concerns about its declining value. Investors will be closely watching the Federal Reserve meeting for further guidance on interest rates and inflation. Despite some uncertainties, the outlook for Asian shares remains optimistic as traders navigate through the market dynamics influenced by both domestic and global factors.
