Global markets tread water as yen moves dominate currency trading
Market Overview and Currency Movements
By Wayne Cole and Lucy Raitano
LONDON/SYDNEY, May 1 (Reuters) – Global shares steadied on Friday, as investors focused on currency markets after the yen jumped against the dollar in European trading a day after Tokyo authorities were believed to have intervened to prop up the currency.
The dollar lost as much as 1% against the yen in a matter of minutes on Friday before moderating. It was last down 0.1% on the day at 156.54.
Recent Yen Volatility and Market Reactions
“The move is clearly – thus far anyway – a lot more modest than the moves that we saw in dollar-yen yesterday,” said Mike Brown, senior research analyst at Pepperstone.
Japanese authorities stepped into the markets to haul the currency back from near two-year lows on Thursday.
Is More Intervention Likely?
Comments from Japan’s top foreign exchange diplomat Atsushi Mimura and the yen’s jump sparked speculation among currency traders of another round of intervention by Japan.
U.S. futures were steady, while most major European markets were closed for holidays. The FTSE 100, one of the few bourses open, was last down 0.5%.
Impact of Tech Earnings and Geopolitical Tensions
Market watchers are digesting this week’s upbeat earnings at major tech companies that drove Wall Street to record highs on Thursday.
Apple rose in pre-market trading on Friday after reporting third-quarter sales growth above estimates.
Global shares clocked their biggest monthly rise since 2020 in April, buoyed by earnings optimism even as oil flows remain disrupted through the vital Strait of Hormuz.
Iran on Thursday said it would respond with “long and painful strikes” on U.S. positions if Washington renewed attacks and restated its claim to the strait.
A senior United Arab Emirates official said on Friday Tehran could not be trusted over any unilateral arrangements it makes for the Strait of Hormuz, in a sign of deep mistrust on all sides as efforts to end the war in the Middle East remained at an impasse.
Brent crude firmed 0.8% to $111.3 a barrel.
Japan Draws a Line for Yen
Most of the day’s focus will likely be on currency markets as the Japanese yen was poised for its strongest weekly rally since early February, while investors remained on alert for further action from Japan’s Ministry of Finance.
“From here, the market will look for actual intervention rather than stern warnings to the market, and whether the U.S. side speaks up in favour of Japan’s actions,” wrote Saxo market strategists in a Friday note.
Other Major Currencies and Central Bank Activity
Elsewhere, the euro rose 0.2% to $1.1754 and away from a three-week trough of $1.1655. The pound ticked 0.1% higher to a 10-week high at $1.36035.
It has been a central-bank-heavy week after the Bank of England, European Central Bank and the Federal Reserve all kept rates on hold even as spiking energy prices have raised the risk of inflation.
ECB and Fed Policy Outlook
European Central Bank President Christine Lagarde said board members were debating whether to increase rates and noted that data over the next six weeks would decide the issue.
“The messages conveyed during the press conference leave us with a distinct perception that the consensus among governors is that they will hike policy rates at the next meeting on June 11,” analysts at Citi said in a note.
“We find no reason to alter our expectation of back-to-back rate hikes in June and July.”
That followed a hawkish shift from the Federal Reserve on Wednesday, leading markets to give up hope for a rate cut there this year.
The pivot left U.S. 10-year Treasury yields up 8 basis points on the week at 4.390%, but off a top of 4.436%.
(Reporting by Wayne Cole; Editing by Shri Navaratnam, Sam Holmes, Thomas Derpinghaus and Barbara Lewis)
