Asian stocks fall, yen rises as BOJ unexpectedly changes policy

© Reuters. FILE PHOTO: Pedestrians wait to cross the street at a junction near a giant display of the stock index in Shanghai, China August 3, 2022. REUTERS/Aly Song

By Scott Murdoch

SYDNEY (Reuters) – The yen rallied and Asian shares fell sharply on Tuesday following the Bank of Japan’s (BOJ) decision to allow a hike in long-term interest rates, a move analysts say. could signal a step toward changing the long-run yield curve of Japan.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.9%.

The stock index fell 2.2% after trading in positive territory earlier in the day, as shares continued to trade following the BOJ decision.

At its last meeting of the year, the BOJ said yield curve control (YCC) targets, set at -0.1% for short-term rates and around 0% for 10-year bonds. year will be kept the same.

But significantly it has decided to allow 10-year bond yields to rise and fall by 50 basis points each time from its 0% target, compared with 25 basis points each time before.

“The move comes earlier than I expected but is a step towards policy normalization in Japan,” Kerry Craig, global market strategist at JP Morgan Asset Management, told Reuters.

“The most common market effects in the foreign exchange market are due to differences between US and Japanese policy settings.

“Although there is still a big gap, hints that the BOJ is moving away from extremely loose policy should keep the yen positive in the near-term.”

The dollar fell 2.43% against the yen to 133.62 following the BOJ decision, hitting a 4-month low.

Australian shares extended their previous losses to drop 1.27% in afternoon trading.

Hong Kong’s fell 1.4% while China’s CSI300 Index fell 1.15%.

In early European futures trading, the region as a whole was down 0.89% at 3,784, German was down 0.91% at 13,888, futures were down 0.63% at 7,321.

US stock futures fell 0.52% to 3,825.5.

In Asian trading, the yield on the benchmark rose to 3.6752% from a US close of 3.583% on Monday.

The two-year yield, which rose in line with traders’ expectations of higher Fed funds rates, was at 4.2662% versus a US close of 4.262 percent.

The Reserve Bank of Australia considered leaving rates unchanged at its December 6 policy meeting, according to minutes released on Tuesday, but offered a 25 basis point increase.

The index fell 162.92 points, or 0.49%, to 32,757.54, the index fell 34.7 points, or 0.90%, to 3,817.66 and the index fell 159.38 points, equivalent to 1.49%, remaining 10,546.03. The three markets closed in the red for the fourth consecutive session.

“We may not get much of a Santa stock market rally as Wall Street rushes to price credit risk and earnings,” OANDA analyst Edward Moya wrote.

The S&P 500, Dow and Nasdaq are on track to post their biggest annual percentage losses since 2008, the lowest point of the global financial crisis.

up 0.7% to 75.71 USD/barrel. increased to 80.44 USD/barrel.

slightly higher at $1,792.29 an ounce. [GOL/]

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