The Tokyo Stock Exchange climbed more than 2% on Thursday in a market boosted by the decline of the yen, which continued to widen its losses after accommodating statements from the new Japanese Prime Minister on monetary policy. In Tokyo, the flagship Nikkei index rose 2.49% to 38,750.89 points around 01:00 GMT and the broader Topix index gained 1.55% to 2,693 points.
The Japanese currency continued to weaken, trading at 147.17 yen per dollar, the lowest in almost two months, against 143.76 yen the day before at 06:15 GMT, a weakening likely to favor Japanese exporting companies. . The yen widened its losses against the dollar after suddenly dropping by 2% on Wednesday in American trade, in reaction to statements by the new head of government, officially elected on Tuesday.
“Accommodating monetary conditions”
Shigeru Ishiba felt that his country was not “in an environment conducive to further rate increases”after a meeting with the government of the Bank of Japan (BoJ), Kazuo Ueda. The latter for his part affirmed that his institution would support the economy “through accommodating monetary conditions”. The BoJ has already raised its key rate twice this year, for the first time since 2007, while all the other major central banks have cut them at the same time: a large gap which had favored an increase in the yen and put the Tokyo Stock Exchange under pressure.
The pressure on the yen was reinforced on Wednesday by the rise in American bond rates, which accompanied an indicator showing more job creation than expected. The Japanese currency also continued to decline against the single currency, to 162.44 yen per euro. “The arguments remain to anticipate a strengthening of the yen, which should remain supported by its appeal as a safe haven” in the face of geopolitical tensions, “and by a reduction in the yield gap” between Japan and the United States, where the American central bank (Fed) should continue to lower its rates, however tempers Charu Chanana of FX Strategy. “But the Fed and the BOJ are likely to act gradually” to modify their rates, “which will slow down any progression of the yen”she admits.
Oil: “caution remains in order”
For their part, oil prices continued to rise in a feverish market faced with renewed tensions in the Middle East. Around 01:00 GMT, the price of a barrel of Brent from the North Sea increased by 0.66%, to $70.76. A barrel of American West Texas Intermediate (WTI) gained 0.61%, to $74.51. Black gold prices skyrocketed again on Wednesday at the start of American trading, boosted by fears of disruptions in the supply of crude, after the Iranian attack on Israel and threats of an Israeli response. The oil market then ran out of steam, speculation about an increase in production from OPEC countries somewhat outweighing the escalation in the Middle East.
“As quickly as panic set in, oil prices reversed, thanks to a reality check with last week’s announcement of an increase in US oil inventories: the market could be better supplied than ever before. ‘we didn’t think so’adds Stephen Innes, analyst at SPI Asset Management. “Caution remained in order” faced with the volatility of the geopolitical situation, he warned, however.
