Asian equities opened higher on Friday after US stocks closed up on Thursday. But shares in Tokyo and China reversed earlier gains to head to negative territory. The dollar was mixed in Asian trading as it was weaker against the pound and the euro but firmer against the yen.
Comments on Thursday by Kozo Yamamoto, an advisor to Japan’s prime minister, raised expectations that the Bank of Japan might ease monetary policy. Yamamoto said that the Bank of Japan’s October meeting would be a ‘good opportunity’ to announce further stimulus measures. The comments sent the yen lower on the prospect of looser monetary policy in Japan.
The dollar rallied to 121.32 yen on Thursday but has since pulled back to below the 121 handle, trading at 120.65 yen in late Asian session on Friday. Stronger-than-expected business survey index gave some support to the yen. The euro and the pound also moved higher, rising to 136.11 yen and 186.36 yen respectively.
The Australian dollar held on to most of its gains from yesterday’s strong employment data and was trading at 0.7057 against the greenback in late Asian session. But the kiwi was stuck near Thursday’s lows around 0.6310 against the dollar after the Reserve Bank of New Zealand strongly hinted at further rate cuts and called for a weaker currency following its latest policy meeting.
Final CPI figures out today confirmed German annual inflation at 0.2% in August. With very little major data out of the Eurozone, the euro has been moving higher against the dollar as markets adopt a wait-and-see approach for the dollar before next week’s FOMC meeting. Comments from ECB officials in recent days on the ECB’s readiness to expand or extend its quantitative easing program have failed to talk down the euro as the single currency has now recovered all its losses from last week’s ECB policy meeting.
The euro was up at 1.1288 against the dollar in late Asian trading, while against the pound it was firmer at 0.7310. Sterling staged a late rally on Thursday following the Bank of England’s minutes, which said that it was too early to assess the impact of recent events on the UK economy. Markets were expecting a more dovish tone and despite pulling back from initial gains after the minutes, the pound later resumed its rally against the dollar to rise back above the 1.54 handle. It was last trading at 1.5443 dollars.
Crude oil prices fell on Friday after Saudi Arabia dismissed the proposal to hold a summit of oil producers to discuss the low oil prices. WTI and Brent crude futures were down around 1% at $45.30 and $48.41 respectively.
The rest of the day is expected to remain relatively quiet with US producer prices and the University of Michigan consumer confidence index to be the main data of interest.