Asian stocks inched higher on Tuesday as investors awaited a slew of economic data, corporate earnings and the U.S. Federal Reserve's policy meeting, while the yen was weaker a day after suspected intervention lifted it from 34-year lows. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab was 0.36% higher, set to clock in a nearly 1% gain for the month, its third straight month of gains.
European bourses are set for a lacklustre open, with Eurostoxx 50 futures and FTSE futures little changed ahead of a euro zone inflation report. This week's other data releases include U.S. labour market reports, while the Fed is due to convene on Tuesday for its two-day meeting at which it is expected to stand pat on interest rates but strike a hawkish tone.
The spotlight remains on the yen after a volatile start to the week as the Japanese currency surged to 154.40 per dollar on Monday from a fresh 34-year low of 160.245, with traders citing yen-buying intervention by authorities.
Markets had been anticipating that Japan might intervene to prop up the yen after the currency fell more than 10% against the dollar this year. On Tuesday, the yen was last at 156.76 per dollar. Japan's top currency diplomat Masato Kanda said on Tuesday authorities were ready to deal with foreign exchange matters around the clock while declining again to comment on whether the finance ministry had intervened to a day earlier.
"We are ready 24 hours, so whether it's London, New York or Wellington (hours), it doesn't make a difference," the vice finance minister for international affairs told reporters. Vasu Menon, managing director of investment strategy at OCBC, said intervention alone cannot alter the wide gulf in interest rates that is largely driving the yen's decline.
The yen has been under pressure as U.S. interest rates have climbed and Japan's have stayed near zero, funnelling cash out of yen and into higher-yielding assets.
"A lot now hinges on the outcome of the Fed policy meeting this week," said Menon. "Markets will be waiting with bated breath to see if the Fed turns more hawkish, which will support the U.S. dollar and undermine the appeal of the yen. If the Fed does not sound as hawkish as markets fear, this could help the yen to strengthen."
Investors have continually had to dial back expectations for the timing and magnitude of U.S. rate cuts this year after hotter-than-expected inflation reports, with markets pricing in a 57% chance of a rate cut in September, CME FedWatch Tool showed. Traders are now pricing in 35 basis points of cuts in 2024, drastically lower than the 150 bps of easing priced at the start of the year.
The shifting expectations on U.S. rates have lifted Treasury yields and the dollar, dominating the currency market. Against a basket of currencies, the dollar was higher at 105.85. The index is up over 1% in April and over 4% for the year. Meanwhile, earnings season heats up this week with high profile results from Amazon.com (AMZN.O), opens new tab and Apple (AAPL.O), opens new tab.
Overnight, U.S. stocks ended higher, led by sharp gains in Tesla (TSLA.O), opens new tab shares after the electric vehicle maker made progress in securing regulatory approval to launch its advanced driver-assistance program in China. In Asia, the Nikkei (.N225), opens new tab rose 1% as Japan reopened after a holiday on Monday but was still on course for a 5% fall in April, its first monthly decline this year.
China stocks were mixed in with the blue-chip index (.CSI300), opens new tab down 0.20%, while Hong Kong's Hang Seng index (.HIS), opens new tab was up 0.12%. The Hang Seng was on course for a 7.5% rise in April, its strongest monthly performance since January 2023.
U.S. crude fell 0.22% to $82.45 per barrel and Brent was at $88.29, down 0.12% on the day. Spot gold eased 0.3% to $2,325.79 per ounce.
