The ASX200 finished down just 8 points or 0.10% to 7,695.20 today after a midday rally failed to maintain its momentum.
Investors are moving cautiously, waiting for the UK and US to hand down interest rate movement decisions over the next two days.
Most analysts polled by FactSet predicted the Fed would keep US interest rates steady tonight, and again in May.
The UK is expected to follow suit on Thursday – while the UK chancellor is predicting inflation will fall to the targeted 2% this year, they’re not there yet.
Strength in Energy and Communication Services wasn’t enough to lift the ASX today.
That said, the bloodletting wasn’t too severe in any one sector – Consumer Staples, Healthcare, Info Tech and Utilities all fell about 0.20-0.45%.
The worst-performing stocks were South32 Ltd (LSE:S32, ASX:S32, OTC:SHTLF, JSE:S32), down 4.33%, and Nickel Industries Ltd, down 4.06% as BHP (ASX:BHP) announced cuts to contractors at its Kalgoorlie nickel smelter and the battery metal continues to fall in value.
Yen falls as BOJ lifts interest rates
Capital.com senior market analyst Daniela Hathorn joins us to discuss the Bank of Japan’s (BOJ) interest rate hike, which brought the island nation’s cash rate above 0% for the first time in 17 years.
“On top of raising rates from -0.1%, the BOJ is abandoning its yield curve control policy, which involved intervention to ensure the yield on 10-year government bonds remained below 1%,” Hathorn writes.
“Japan had struggled with deflation for a whole generation, meaning policymakers had to implement strict quantitative easing measures, but after a few failed attempts wages are finally rising.
“Consumer prices have risen beyond the target and not only because of external factors.
“However, the central bank isn’t yet comfortable about the stability of the Japanese economy, saying that largely accommodative monetary conditions will remain for the time being.
“This weighed on the Japanese Yen. The market reaction has also been limited because there was somewhat of a lack of surprise given that Japanese officials had already hinted at the end of negative rates a few days earlier.
“The fact that Japanese rates have returned to neutral territory does not negate the fact that the BOJ still has the lowest policy rates in the world.
“Looking at yield differentials, the gap between Japanese and US treasuries remains wide.
“The fact that the rate hike is seen as a one-time thing has caused the market reaction to be limited, with the Yen trading weaker across the board. Markets had already anticipated the decision and removed much of the surprise.
“However, Governor Ueda’s dovish comments after the meeting were enough to end any post-decision bullish sentiment in the Japanese currency.
“The carry trade versus the major currencies continues to be in play and is expected to continue for a while. This means the Yen is likely to see further weakness, especially if the other central banks continue to delay cutting rates.
“A key event this week will be the Federal Reserve meeting on Wednesday.
“The latest inflation readings coming in higher-than-expected have pushed back on expectations about rate cuts, allowing the US dollar and yields to recover some lost momentum over the past week.
“The stronger USD is also clouding the potential appetite in JPY, and it's likely to continue this way in the coming days if the Federal Reserve continues to push back on the start of the rate-cutting cycle.”
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